Euromonitor 10 Global Consumer Trends

10 GLOBAL CONSUMER TRENDS FOR THE NEXT FIVE YEARS Euromonitor International November 2012

10 GLOBAL CONSUMER TRENDS FOR THE NEXT FIVE YEARS

LIST OF CONTENTS AND TABLES Executive Summary ..................................................................................................................... 1 1. the Search for Value ............................................................. ................................................ 1 2. A More Cautious Cautio us Approach To Credit ................................................................................... 1 3. People Power ................................................................................. ...................................... 3 4. Multicultural Consumerism ................................................................................................... 3 5. the Fight Against Obesity ................................................................ ...................................... 4 6. New Attitudes Towards Growing Old .................................................................................... 5 7. Experience-based Consumption ................................................................ ........................... 6 8. the Rise in Social Responsibility ........................................................................................... 7 9. the Chemical Backlash .............................................................................. ........................... 8 10. Mobile Cocooning .......................................................................................................... ... 10 Summary 1

The 10 Global Consumer Trends and their Impact 2012............................ 11

Introduction............................................................. ................................................................. ... 14 Trend 1: the Search for Value .................................................................................................... 14 Trend Outline ...................................................... ................................................................. ... 14 Chart 1

Consumer Shopping Habits 2011 .............................................................. 15

Implications ......................................................... ................................................................. ... 15 Chart 2

Global Retail Growth vs Growth in Discounters and Internet Retailing 2008-2012 ............................................................... ................................... 18

Outlook ................................................................................................................................... 19 Chart 3

Forecast Global Consumer Expenditure and Prices 2011-2016 ................ 19

Trend 2: A Cautious Return To Borrowing.................................................................................. 20 Trend Outline ...................................................... ................................................................. ... 20 Table 1 Chart 4

Saving Rates 2006/2011/2016 ................................................................ ... 21 Consumer Credit: Global Outstanding Balance per Household 2007/2012 .................................................................................................. 23

Implications ......................................................... ................................................................. ... 23 Table 2 Chart 5

Number of Credit, Debit and Pre-paid Cards in Circulation 2007/2012/2017 ......................................................................................... 24 Leading Growth Markets for Personal Credit Cards 2007/2012 ................. 24

Outlook ................................................................................................................................... 26 Chart 6

Global Consumer Credit Balance: Forecast Growth by Category 2012/2017 .................................................................................................. 27

Trend 3: People Power ...................................................... ......................................................... 28 Trend Outline ...................................................... ................................................................. ... 28 Chart 7

“How Often Do You Read Online Reviews?”, by Country 2011 ................. 29

Implications ......................................................... ................................................................. ... 30 Outlook ................................................................................................................................... 32 Chart 8

Number of Internet Users 2011-2016 ......................................................... 32

Trend 4: Multicultural Consumerism ........................................................ ................................... 33 Trend Outline ...................................................... ................................................................. ... 33 Table 3

Selected Religions by Country 2010 .......................................................... 35

© Euromonitor International

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LIST OF CONTENTS AND TABLES Executive Summary ..................................................................................................................... 1 1. the Search for Value ............................................................. ................................................ 1 2. A More Cautious Cautio us Approach To Credit ................................................................................... 1 3. People Power ................................................................................. ...................................... 3 4. Multicultural Consumerism ................................................................................................... 3 5. the Fight Against Obesity ................................................................ ...................................... 4 6. New Attitudes Towards Growing Old .................................................................................... 5 7. Experience-based Consumption ................................................................ ........................... 6 8. the Rise in Social Responsibility ........................................................................................... 7 9. the Chemical Backlash .............................................................................. ........................... 8 10. Mobile Cocooning .......................................................................................................... ... 10 Summary 1

The 10 Global Consumer Trends and their Impact 2012............................ 11

Introduction............................................................. ................................................................. ... 14 Trend 1: the Search for Value .................................................................................................... 14 Trend Outline ...................................................... ................................................................. ... 14 Chart 1

Consumer Shopping Habits 2011 .............................................................. 15

Implications ......................................................... ................................................................. ... 15 Chart 2

Global Retail Growth vs Growth in Discounters and Internet Retailing 2008-2012 ............................................................... ................................... 18

Outlook ................................................................................................................................... 19 Chart 3

Forecast Global Consumer Expenditure and Prices 2011-2016 ................ 19

Trend 2: A Cautious Return To Borrowing.................................................................................. 20 Trend Outline ...................................................... ................................................................. ... 20 Table 1 Chart 4

Saving Rates 2006/2011/2016 ................................................................ ... 21 Consumer Credit: Global Outstanding Balance per Household 2007/2012 .................................................................................................. 23


Number of Credit, Debit and Pre-paid Cards in Circulation 2007/2012/2017 ......................................................................................... 24 Leading Growth Markets for Personal Credit Cards 2007/2012 ................. 24

Outlook ................................................................................................................................... 26 Chart 6

Global Consumer Credit Balance: Forecast Growth by Category 2012/2017 .................................................................................................. 27

Trend 3: People Power ...................................................... ......................................................... 28 Trend Outline ...................................................... ................................................................. ... 28 Chart 7

“How Often Do You Read Online Reviews?”, by Country 2011 ................. 29

Implications ......................................................... ................................................................. ... 30 Outlook ................................................................................................................................... 32 Chart 8

Number of Internet Users 2011-2016 ......................................................... 32

Trend 4: Multicultural Consumerism ........................................................ ................................... 33 Trend Outline ...................................................... ................................................................. ... 33 Table 3

Selected Religions by Country 2010 .......................................................... 35


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Implications ......................................................... ................................................................. ... 36 Chart 9 Summary 2

Sales of Spicy Chilli/Pepper Sauces in the US 2007/2012/2017 ................ 37 Selected Ethnic Beauty and Personal Care Launches 2010-2012 ............. 39

Outlook ................................................................................................................................... 40 Trend 5: the Fight Against Obesity .......................................................... ................................... 40 Trend Outline ...................................................... ................................................................. ... 40 Table 4

Obesity Rates by Country 2006/2011/2016................................................ 2006/2011/2016................................................ 42

Implications ......................................................... ................................................................. ... 43 Chart 10 Chart 11 Chart 12 Table 5 Table 6

Respondents “On a Diet Trying to Lose Weight” by Country 2011 ............. 43 Respondents “On a Diet Trying to Lose Weight” by Age 2011 ................... 43 Importance of “Limited Fat Consumption” by Country 2011 ....................... 44 Global Sales of Weight Management Products 2006/2011/2016 ............... 45 Global Sales of Selected Better-for-you Products 2007/2012/2017 ........... 45

Outlook ................................................................................................................................... 46 Chart 13

Forecast Growth in Obesity Rates by Country 2011-2016 ......................... 47

Trend 6: New Attitudes To Growing Old ............................................................ ......................... 48 Trend Outline ...................................................... ................................................................. ... 48 Table 7 Chart 14

Healthy Life Expectancy by Country 2006/2011/2016 ................................ 49 Internet Usage 2011 .......................................................... ......................... 50

Implications ......................................................... ................................................................. ... 51 Table 8 Table 9

Global Sales of Age-related Beauty Products 2006/2011/2016 ................. 52 Global Sales of Age-related Health and Wellness Products 2007/2012/2017 ......................................................................................... 53

Outlook ................................................................................................................................... 53 Trend 7: Experience-based Consumption .................................................................................. 54 Trend Outline ...................................................... ................................................................. ... 54 Chart 15

Intentions Regarding Spending Habits by Country 2011 ............................ 56

Implications ......................................................... ................................................................. ... 56 Chart 16 Chart 17

Global Arrivals 2006/2011/2016 20 06/2011/2016 .............................................................. ... 56 Growth in Arrivals: Top 20 Countries 2006/2011 ........................................ 58

Outlook ................................................................................................................................... 60 Table 10 Chart 18 Chart 19 Chart 20

Departures from China 2006/2011 .......................................................... ... 61 Top 10 Growth Markets for Spas 2011/2016 .............................................. 61 Top 10 Growth Markets for Theme Parks 2011/2016................................. 62 Top 10 Growth Markets for Specialist Coffee Shops 2011/2016 ................ 62

Trend 8: the Rise in Social Responsibility .................................................................................. 63 Trend Outline ...................................................... ................................................................. ... 63 Chart 21 Chart 22

Importance of Green/Ethical Descriptors When Considering a Purchase, by Country 2011 .......................................................... .............. 64 Willingness to Pay More for Ethical Products, by Type and by Country 2011 ............................................................. .............................................. 65

Implications ......................................................... ................................................................. ... 66 Table 11

Fairtrade Sales in Leading Countries 2010-2011 ....................................... 67

Outlook ................................................................................................................................... 69


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Trend 9: the Chemical Backlash .............................................................. ................................... 71 Trend Outline ...................................................... ................................................................. ... 71 Chart 23 Chart 24

Attributes that Respondents Are Willing to Pay More for, by Country 2011 ............................................................. .............................................. 72 Trustworthiness of Descriptors when Used to Label Products, by Country 2011.............................................................................................. 73

Implications ......................................................... ................................................................. ... 74 Summary 3 Table 12 Table 13 Summary 4

Impact of Chemical Backlash on Ingredients Industry ................................ 75 Global Sales of Naturally Healthy (NH) Food and Drink 2007/2012/2017 ......................................................................................... 76 Global Sales of Organic Packaged Food 2 007/2012/2017......................... 77 Selected Natural Beauty and Personal Care Launches in the US 2011-2012 ............................................................... ................................... 79

Outlook ................................................................................................................................... 80 Table 14

Forecast Sales of Natural Ingredients 2011/2016 ...................................... 81

Trend 10: Mobile Cocooning ...................................................................................................... 81 Trend Outline ...................................................... ................................................................. ... 81 Chart 25

Mobile Phone Use by Country 2011 ........................................................ ... 82


Smartphones as a % All Mobile Phones 2006/2011/2016.......................... 84 Global Sales of Smart Devices 2006/2011/2016 ........................................ 85

Outlook ................................................................................................................................... 87 Table 16 Chart 27

World‟s Leading Markets for Smart Devices by Country 2011/2016 .......... 88 Global Mobile App Store Downloads 2011-2016........................................ 89


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10 GLOBAL CONSUMER TRENDS FOR THE NEXT FIVE YEARS EXECUTIVE SUMMARY

1. the Search for Value 

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One of the key outcomes of the recession was that consumers reined in spending and became much more cautious about how, when and where they shopped. With recovery slow and employment high, this thrifty mindset looks set to continue over the next five years. While brands and status are still important to many, t hese factors have on the whole been overshadowed by the need for durability and value. Purchases are more considered and bargain hunting more aggressive. Euromonitor International‟s Annual Survey of online consumers revealed that the majority of respondents globally (59%) agreed that they like to find bargains. This was especially high among women (64%), and among consumers in the US and UK (76% each). Internet shopping is one of the main beneficiaries of the trend towards thrift, the most successful players being Amazon and similar discounters that offer low prices without compromising on quality. Group buying websites, such as Groupon, Living Social and a host of national players, have sprung up worldwide. These businesses alert subscribers, via the internet or mobile devices, to time-limited local or national offers. Group buying websites offer deals on a wide variety of goods and services, from restaurants and spas to educational packages to extreme sports. They have recently diversified into more specialised health treatments, including cosmetic surgery and medical check-ups. Within grocery retailing, the hard discounter model became more popular during the recession, as these stores are able to offer a range of groceries at budget prices by offering only a limited range of goods, with a heavy focus on private label. Fixed price stores (known commonly as dollar stores in the US, 100 yen stores in Japan and pound stores in the UK) have also fared well since the start of the recession, catering both to low-income consumers and the “squeezed middle” looking for bargains. Value clothing (or “fast fashion”) concepts, such as the UK‟s Primark, Germany‟s Kik and Japan‟s Uniqlo, have also gained rapid popularity since the start of the recession by selling large volumes of clothing with a “cheap chic” image among younger consumers. Uncertain economic prospects, combined with high unemployment and the prospect of rising food and commodity prices, mean that consumers will remain cautious over the forecast period, and will focus on making sure their money goes as far as possible.

2. A More Cautious Approach To Credit 

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Since the start of the recession, consumers in developed markets have prioritised the need to live within their means and have tended to acquire new credit only for larger, specific purchases. Consumers have focused on repaying their debt obligations, managing new credit more responsibility and relying on existing credit cards, or switching to cash cards or debit cards in order to curb their spending.


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There were signs in 2012 that the personal finance market was beginning to pick up again, partly thanks to growing demand from the new middle classes in emerging markets, but also due to low interest rates and pent-up demand for big-ticket items in developed markets. Attitudes towards saving and spending vary considerably by country. For example, in China and India, it is customary to save a high proportion of income (39% and 30%, respectively, in 2011), while in the US and UK consumers saved just 3% and 2% of income, respectively. A slowdown in lending has gone hand in hand with the trend towards higher savings since the start of the recession and is another indication of increased caution, both on the part of consumers and banks. Lending legislation has been tightened in several countries. The EU Consumer Credit Directive, Australia‟s Consumer Credit Protection Amendment (Credit Cards and Home Loans) Bill 2011 and Japan‟s revised Money Lending Law were all recently brought in to protect consumers. The global card lending balance increased by just 1% over the 2007-2012 period, to US$953. However, this was offset by a maj or boom in education lending, with loans in this category reaching an average of US$955 per household in 2012, up from just US$578 in 2007. The growth of student loans reflects both the rising number of students as job prospects remain bleak for young people, and higher tuition fees in countries such as the US, the UK and Australia. A preference for debit or pre-paid payment methods emerged as consumers turned to nonrevolving rather than revolving payment instruments. The number of debit and pre-paid cards in circulation globally grew by 69% and 63%, respectively, over the 2007-2012 period, to 6.1 billion and 2.1 billion. The recession had a severe impact on the market for personal c redit cards, with the number of cards in circulation increasing by j ust 13% globally between 2007 and 2012, to 2.1 billion. Nevertheless, credit card usage boomed in certain markets, such as C hina, where the generation born in the 1980s and 1990s are more open towards card lending and regard it as a fashionable way to pay. With mainstream consumer credit products becoming increasingly difficult to obtain during the review period, consumers began to explore less traditional products, such as short-term “payday loans” or peer -to-peer (P2P) lending. Payday loans have come under fire in the UK, where many lenders charge interest at an annual percentage rate (APR) of over 4,000%. This has caused many vulnerable young people to become locked into a serious debt cycle if they end up taking out multiple loans. P2P involves borrowing from friends, family or online P2P lenders. This enables consumers to secure a loan where they have been turned down by a formal institution, and enables wealthier consumers to achieve better returns on investment when interest rates are low. P2P lending became especially popular in China following the tightening of bank credit in 2010. There are now more than 2,000 P2P websites, and it was reported that online loans increased 300-fold to RMB6 billion in the first half of 2011. Lending criteria are expected to remain strict over the next few years, but there are signs that savings rates are stabilising, and the forecast period is expected to see consumer borrowing increase, though at a lower rate than in pre-recession times as consumers remain cautious. The increasing aspirations of the new middle class consumers in emerging markets will be a key driver of growth in consumer lending in these markets during the forecast period, providing opportunities for foreign companies to offer a range of credit services. Card lending could see real value growth of as much as 21% over the forecast period, after having declined slightly in constant value terms over the 2007-2012 period.


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3. People Power 

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In a new age of cautiousness and considered purchasing, consumers no longer take marketing at face value. Individuals are taking it upon themselves to carry out their own research, make their opinions known and take a more active role in product development and promotion. The growing importance of consumer contributions in terms of public f eedback, reviews and ratings has had a significant impact on the foodservice and tourism industries. Positive recommendations on global websites such as TripAdvisor can dramatically boost visitor traffic for small businesses that are u nable to afford to pay for such publicity themselves. Concerns that retailers and restaurant owners are seeking to manipulate the online ratings system are a key issue in the industry. However, websites and consumers are becoming more savvy about differentiating between genuine and fake reviews. Social media has had a huge impact on t he shaping of public opinion. With over 100 million users, Twitter has given everyone a chance to make their voice heard, from reporting news to broadcasting thoughts, sharing ideas and organising protests. Marketers are realising that monitoring conversations about their brands and engaging in dialogue with customers are the most useful ways to obtain valuable feedback; while advertisements via social media are effective as they can be targeted at individuals. Celebrity endorsement on Twitter has been shown to have a huge impact on a brand‟s sales, and has become one of the most important sources of new business and traffic. Companies are taking advantage of the trend towards people power by employing crowdsourcing techniques, whereby consumers are consulted about their experience of a product or on the design or marketing of new products – sometimes with rewards. Successful crowdsourcing initiatives have helped many companies to drive brand development, and this is a method that will be employed increasingly in the future. Social networks offer immense opportunities for marketers to engage consumers through crowdsourcing efforts. There has recently been a boom in crowdsourced travel apps, such as Localmind, which connects consumers with local people all over the world who can give them the most up -todate and accurate information about where they are going. With the world becoming ever smaller and consumers turning in their droves to social media sites to discuss their ideas and opinions and to review forums to make buying decisions, the power of consumers to influence both each other and brands will become ever greater.

4. Multicultural Consumerism 

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Societies are becoming more multicultural, as developed markets see an influx of migrant workers and foreign students, while existing ethnic populations expand. In the US, babies born to minority groups represented the majority of all births for the first time in 2012. Europe, too, is becoming an ever greater melting pot, as many eco nomic migrants and asylum seekers wind their way to Western Europe in search of work. Germany has the largest number of foreign citizens in Europe (7.2 million in 2011). While Asia in general attracts fewer immigrants, the number of non-Korean people in South Korea has risen substantially in recent years. Most of these are from other parts of Asia, including China.


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More important, perhaps, than the growth in migrant numbers is the fact that minority groups are becoming more economically empowered. For example, in the US, a recent study showed that Asian Americans are the highest income and best educated racial group in the country. The age profile of ethnic minorities tends to be relatively young and fertility rates high. Therefore, demand for baby products and family-orientated products and services is strong among this consumer group. Growing multiculturalism is impacting eating, shopping and leisure habits within developed markets, in terms of the array of ethnic foods on offer in both retail and foodservice, and in changing music and fashion tastes. Developed markets are also becoming more diverse in terms of religious identity with migration from non-Christian countries. There are now more than 20 million Muslims in Europe and their number is growing, fuelling demand fo r Islam-friendly products, such as halal meat. The line between food designed for consumption by ethnic consumers and mainstream foods with an ethnic flair has becoming increasingly blurred, as Western consumers have become more adventurous eaters with a taste for s picier and more exotic foods. At the same time, companies are tailoring products specifically for ethnic shoppers through dedicated efforts to get to know their cultures and requirements – for example by adapting packaging and incorporating other languages in marketing. The growth and rising purchasing power of multicultural consumers has created higher demand for beauty products that meet the needs of diverse skin tones and hair types. Marketers have also introduced non-ethnically positioned brands to new communities by employing spokespeople who appeal to multiple demographics, such as Mexican-American actress Salma Hayek, enlisted by CVS Pharmacies to launch its Nuance private label in 2011. As ethnic and foreign populations continue to rise and their purchasing power grows, multicultural consumers will represent a critical market whose needs manufacturers will continue to find new ways to cater to.

5. the Fight Against Obesity 

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Despite the growing trend towards health and wellness, obesity rates have reached record levels and continue to grow, albeit more slowly than before. According to the World Health Organization (WHO), obesity rates have doubled since 1980. Once considered a problem only of major developed markets, emerging countrie s are also now seeing a rise in obesity. The problem is particularly severe in Latin America, and Mexico became the leading country for obesity by 2011, with 37% of over 15 year-olds affected. Obesity rates are generally low in Asia Pacific, but several countries in this region are predicted to see among the fastest growth in obesity rates over the forecast period, as rising incomes lead to consumers adopting convenient Western-style diets and fast food concepts. The crisis has been caused by a rise in consumption of energy-dense foods that are high in saturated fats, combined with more sedentary lifestyles. Furthermore, food labelling is inconsistent, often confusing and sometimes very misleading. The health consequences of obesity and excess weight include heart disease, type-2 diabetes, hypertension and stroke, which are placing a growing burden on healthcare systems. In response, governments have introduced measures such as “fat taxes” on high calorie products and banning vending machines in schools, and have launched campaigns to raise health awareness.


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As the media continues to portray and reinforce the ideal body image as being thin, the main impact of rising obesity has been a desire by consumers to lose weight. This has led to increased incidences of eating disorders such as anorexia among the young. As many are or unable or unwilling to lose weight the hard way – ie by reducing food intake and increasing exercise – they turn to easier solutions such as low-fat/low-calorie diet foods, OTC diet pills or, in more extreme cases, surgery, driving growth in these segments. Sales of both weight management products and better-for-you (BFY) foods performed well over the 2007-2012 review period. The challenge to manufacturers has been to develop products that are both low-fat/low-sugar but also filling and tasty. Restaurants are developing more low-calorie and reduced fat options, and are printing calorie counts on menus in response to demand from weight conscious consumers. In the US, new legislation requires chains with 20 or more outlets to disclose calories, fat and sodium levels. Another consequence of obesity is that body shapes are changing, and fashion must adapt accordingly. There is growing demand for plus size clothing, and many retailers now have special ranges in their stores or specific chains targeting large children or adults. In developed markets, obesity levels are expected to level out over the forecast period as consumers become more aware of healthy li festyles, helped by efforts by governments, manufacturers and foodservice operators to deter consumers from eating fatty or sugary foods. Technological developments will lead to the introduction of tastier diet foods with a higher satiety factor. The development of plant-based sweeteners such as stevia or monk fruit extract could lead to a new generation of low-sugar and sugar-free foods and drinks.

6. New Attitudes Towards Growing Old 

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As populations have aged and society has become more liberal, attitudes towards youth, middle age and old age have changed markedly, blurring the traditionally perceived boundaries of age-appropriate fashion and lifestyles. With parents and children now sharing the same cultures and behaviours, and the internet breaking down age barriers, it is clear that consumer demand is less age specific than ever before. One of the main reasons for people staying younger for longer is that they are taking greater care of their health. Today‟s consumers are better educated about fitness a nd nutrition and are taking preventative measures to preserve their health for as long as possible. Furthermore, advances in medicine mean that healthy life expectancies are increasing all the time, as people are living longer with multiple chronic illnesses. Between 2006 and 2011, healthy life expectancy worldwide rose by more than two years. Studies have shown that the over 50s do not consider themselves old, and many want to learn and work for as long as possi ble. According to a Del Webb survey of 2010, the majority of Baby Boomers believe that old age begins at around 80. The survey also revealed that both young and older Boomers stay active, are in good health and work out, with 51% of older Boomers reporting that they were as active or more active than they were 15 years previously. Digital technology has played a big part i n the blurring of age boundaries, as people of all ages communicate freely through blogs and reviews, online forums and social media, and are therefore exposed to the same culture and references. The desire for Baby Boomers and older Gen Xers to maintain a youthful appearance for as long as possible has opened up opportunities to target older consumers in a range of segments related to hair and skin care, healthcare and fashion.


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One of the categories that has benefited most is that of anti-agers, on which consumers have been prepared to continue spending their money throughout the recession. Overall, sales of anti-agers soared by 63% in value over the 2006-2011 period, to US$22.2 billion. The major cosmetics companies have long used older celebrities to front their anti-ageing campaigns, reinforcing the idea that older women can be glamorous too. For example, Jane Fonda, at 72, is still an ambassador for L‟Oréal‟s Age Perfect line. Hair colourants and hair loss treatments have also benefited from the desire for eternal youth, as consumers seek to cover the tell-tale signs of ageing. Colourants have benefited recently from a rise in at-home hair colouring as a cheaper alternative to expensive salon treatment. Health and wellness products positioned for cardiovascular, digestive and bone and joint health were particularly buoyant over the 2007-2012 period, while omega-3, -6, -9 supplements were popular in the vitamins and minerals category. There has been a boom in the market for non-surgical cosmetic procedures in recent years, as treatments such as injectable fillers have lost their stigma and become more widely available and affordable to the general public. With many now believing age to be a state of mind, marketers will in the future find more ways to identify, communicate and connect with consumers other than on age, for example by targeting them on the basis of their attitudes, values and life stage. The future may see a breakthrough in the development of products that will slow the biological clock. For example, researchers are examining anti-ageing on a cellular level, as well as the effects of testosterone gel, believed to restore libido and general vigour in ageing men.

7. Experience-based Consumption 

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Since the start of recession, consumers in developed markets have focused less on conspicuous consumption and the gain of material possessions, and more on seeking out mood-boosting or even life-changing experiences. Once basic necessities are taken care of, many consumers are prepared to forego the purchase of luxury items in favour of experiencing the feel-good factor associated with being with loved ones or undertaking a new or relaxing activity. This is largely due to the sheer need for escapism that has resulted from a prolonged period of economic austerity, but could also be l inked to the new status culture that compels consumers to seek kudos by documenting their experiences on Facebook and other social networks. New studies of consumption and happiness show that people are happier for longer when they spend money on experiences instead of material objects. Planning in advance gives people something to look forward, while a positive experience can provide happy memories for ever. Experiential pursuits can range from relaxing outings, such as concerts, plays, sporting events, spa sessions or theme parks, to weekend city breaks, more adventurous activities such as scuba diving or mountain climbing, or educational challenges. The trend towards experience hunting has so far been less pronounced in emerging markets, where many consumers are only beginning to reap the benefits of economic development and are eager to buy material goods that were previousl y out of their reach. However, at the same time, increased income and leisure times, combined with new-found freedom to travel, have led rich consumers in new markets such as China, Russia and Brazil to begin looking for new, life-enhancing experiences.


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The desire to escape the daily grind and seek new experiences has probably had the largest impact on the tourism industry. Despite tough economic conditions, the number of global international arrivals increased by 6% in 2010 and a further 4% in 2011. Travellers are more cautious than ever with regard to their expenditure, seeking out the maximum value from their travel experiences and favouring simplicity and authenticity over luxury. This is helped by the vast array of travel apps and advice available onlin e. Niche areas that have benefited from the trend towards experiential travel include holistic and spiritual packages, educational trips and historical and themed tours accompanied by experts. A whole range of foodservice and leisure companies are also benefiting from the move towards experienced-based consumption, especially with group buying websites such as Groupon and TravelZoo clamouring to offer exciting deals to their subscribers. Daily offer sites promote deals for items as diverse as restaurant meals, holidays, sporting experiences such as skydiving and scuba diving, dance classes, movie and museum passes, spa sessions, cookery courses and photography sittings. A US survey by PriceGrabber in 2012 found that 46% of respondents planned to use daily deal sites more often in 2012 than in 2011. Those most likely to be searched were food and dining (53%), shopping (46%), entertainment and events (42%) and family and children (34%). Retailers, foodservice operators and manufacturers are also increasingly feeling the need to incorporate service, excitement and ambience into their marketing strategies, as consumers seek a dimension of experience in every aspect of consumption. Since the start of the recession, restaurants and coffee shops have made a greater effort to enhance the consumer experience and emphasise their authenticity, as consumers look for comfort, familiarity and value. With economic growth – especially in the major economies – struggling to get off the ground, and prospects for the next five years remaining uncertain, consumers will continue to sacrifice income and consumption for quality for life and experiences that enrich their lives. As Asian consumers, in particular, become richer and more sophisticated, demand will grow for more specialised travel experiences, such as heritage and culture, “edutainment” theme parks, “soft adventure”, luxury holidays and sports tourism.

8. the Rise in Social Responsibility 

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Despite consumers having become more value-conscious since the start of the recession, there are also signs that many have become more compassionate and socially responsible. Consumers are more vocal than before in supporting brands that do good, and many are prepared to pay a little more for products that are more ethically produced, more sustainable or come with the promise of a charitable donation. The rise in social consciousness is largely a result of the public being better informed about social, environmental and animal welfare issues as a result of media reports and lobbying by NGOs – often with the help of celebrities. Euromonitor International‟s Annual Survey confirmed that over half of respondents globally considered the factors “fair -trade”, “green/environmentally-friendly” and “sustainably produced” to be important when consider ing a purchase. Furthermore, 47% and 46% of respondents globally agreed that they would pay more for “locally sourced” and “free range” products, respectively, while 43% would pay more for a “fair -trade” product.


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As a result of media coverage and exposure of “cruel” factory farming practices, animal welfare issues have become important to a greater number of consumers. Some have responded by reducing meat consumption or becoming vegan/vegetarian, while others buy free-range meat and eggs. Food whose production involves low energy consumption and/or recyclable packaging is more favourably regarded than before, and more green consumers are factoring in the environmental pollution cost derived from food manufacturing activities in their purchase decisions. Companies have responded to this new-found consumer conscience by spending more money than ever on convincing customers of their corporate social responsibility (CSR) initiatives. 72% of companies had formal CSR programmes in 2012, up from 62% in 2010. Cause marketing has also become an integral part of the m arketing campaigns of many companies. This involves a business partnering with a non-profit organisation for mutual benefit. One of the categories to have benefited f rom the rise in social responsibility is Fairtrade. Many shoppers concerned about poor living and working conditions in developing countries are prepared to pay a premium for products that ensure a fair price is paid to producers. According to Fairtrade Labelling Organizations International (FLO), Fairtrade sales continued to grow in all countries during the recession. The category benefited from the Fairtrade sourcing commitments of several global consumer brands, such as Cadbury Dairy Milk, Nestlé‟s Kit Kat and Ben & Jerry‟s. With “food miles” a hot topic among environmentalists and consumers, leading to greater loyalty to local producers, farmers markets have increased in popularity, especially in countries such as the US and UK, while supermarkets and restaurants are stocking more locally produced products. Animal rights groups and celebrity chefs have successfully raised awareness of animal welfare issues. In the UK, retailers have been forced to orient their supply chains towards more animal-friendly sourcing, while various governments have introduced legislation to protect livestock. The eco-tourism industry has benefited from a desire by consumers to reconcile their demand for adventure and exoticism with their concern for the environment. This type of tourism allows consumers to spend their money to benefit or preserve environmental sites or wildlife. Wider availability, falling prices and media attention will be key factors in boosting awareness and further driving consumer acceptance and uptake of fair-trade products, free range foods, locally sourced produce, eco-friendly products and products that support a cause. The most successful companies in future will be those that can make ethical improvements to their manufacturing processes or end products, while minimising the sacrifices that consumers must make in order to buy and use them. Ethical consumerism will increase in emerging markets where it is currently underdeveloped, as companies are forced to change their practices for the better in order to remain competitive and meet international environmental targets.

9. the Chemical Backlash 

As consumers worry increasingly about their health and wellness and the effects of potentially harmful chemicals found in everyday products, demand for natural ingredients in everything from packaged food to toiletries continues to grow.


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Euromonitor International‟s Annual Survey of online consumers of 2011 revealed that more than half of all respondents (52%) were willing to pay more for a product marketed as “natural”, while 48% would pay a premium for “organic” products. Reflecting their naturally healthy diet, consisting of a high proportion of fish and vegetables, the Japanese were among the strongest advocates of natural ingredients, with 46% of respondents in Japan willing to pay extra for products with a natural positioning. Chinese consumers are especially concerned about food safety, following a spate of highprofile incidents linked to the unconventional use of pesticides and other dangerous ingredients such as food additives, which have caused illness and deaths. The definitions of what constitutes “natural” are more hazy than those pertaining to organic foods. Several big US brands, including Tropicana, Ben & Jerry‟s, SunChips, Tostitos and Snapple, were legally challenged over their use of the word in 2012. Euromonitor International‟s Annual Survey confirmed the confusion felt by consumers with regard to products making natural or organic claims. Globally, only 34 % and 36% of online respondents, respectively, considered “natural” and “organic” labels to be trustworthy. The growth in demand for natural products has affected the ingredients industry at all levels, as food and beauty and personal care manufacturers look for more natural substances, such as botanical extracts, to replace chemicals or highly-processed ingredients. Within the packaged food industry, the trend towards natural ingredients has been particularly pronounced in categories such as soft drinks and confectionery, where parental concern over artificial additives and their alleged effects is high. With the growing emphasis on pet health, natural pet foods represent a growing niche for pet food manufacturers. Recent developments include Hill‟s Science Diet, Nestlé Purina‟s Purina One Beyond and Wal-Mart‟s Pure Balance, its first natural private label pet food. The trend towards natural ingredients has also had a positive impact on the markets for both naturally healthy (NH) and organic food and drinks. Sales have been driven in particular by fast-growing markets such as China, Brazil and Indonesia. The trend towards natural, healthy and authentic ingredients has also crept into the foodservice category, with many restaurants promote the use of fresh, seasonal organic o r local products. These include chains such as Chipotle Mexican Grill in the US and Pret A Manger in the UK. With artificial substances such as parabens, petrochemicals and toxins under the spotlight, consumers are increasingly demanding natural ingredients in their beauty and personal care products, and beauty brands with a natural positioning are now becoming mainstream. Under public pressure, the big companies have been forced to take action and, in August 2012, Johnson & Johnson announced that it would stop, or reduce use of, all potentially harmful chemicals in its beauty and personal care products by the end of 2015. Demand for natural, authentic and wholesome ingredients will continue to grow in the future, providing growth opportunities for marketers in a range of industries, including packaged food, pet food, foodservice, beauty and personal care and household cleaning products. The largest challenge to companies developing new “safe” and/or “natural” alternatives to chemicals in the beauty and personal care market is to make ingredients as effective and functional as the ingredients they are replacing. However, clear er regulations are needed with regard to the use of the term “natural”, as consumers demand more transparency in labelling and will be unwilling to pay the higher price commanded by such products if they are dubious about their origins.


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10. Mobile Cocooning 

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Consumers worldwide are becoming addicted to smart devices such as m obile phones and tablet computers, as they are able to fulfil an ever growing multitude of tasks anywhere and at any time, from shopping, entertaining and networking to banking, education and GPS navigation. Euromonitor International‟s Annual Survey showed that, 53% of online respondents send and receive emails at least once a week, 51% browse the internet, 35% regularly visit social networking sites and 35% play games on their mobile phones. The concept of “mobile cocooning” has developed as, although there is more interaction than ever between friends, family and strangers, this is now more likely to take place remotely from a digital device than face-to-face. The overriding attraction of smart devices is their convenience. Innovations such as 4G, mobile devices that function more like powerful desktops, mobile payments and an array of exciting apps are changing the way consumers live their lives. The most obvious outcome of the boom in mobile devices has been the phenomenal growth in sales of smartphones and tablets, especially in emerging markets. There were 468 million smartphones sold in 2011, which is expected to rise to 1.5 billion by 2016. Since Apple launched its first iPad in 2010, the tablet has gone from an early adopter‟s “musthave” to a common device used by consumers from all walks of life, successfully bridging the gap between the laptop and a smartphone. The number of tablets sold globally soared from just 4 million units in 2006 to 51 million in 2011 and was forecast to increase to 181 million by 2016. Globally, tablet ownership is currently estimated at around 12%, indicating tremendous growth opportunities. Mobile commerce (m-commerce) has developed rapidly as a result of the rise in smart devices. Consumers are not only buying merchandise, services and content direct from their devices, they are also using QR c odes and other apps to get the most out of their shopping experience. The m-commerce market has recently been revolutionised by the arrival of “SoLoMo” (social, local, mobile), which refers to the convergence of social media with mobile phones and location-based services like Foursquare and Gowalla. The explosion in smart device usage has created a world of opportunities for software developers. BusinessNewsDaily reported in July 2012 that the m obile applications market is worth US$20 billion and growing rapidly. At the same time, however, the app culture has negatively impacted physical sales of items such as video game hardware and software, books and newspapers, CDs and MP3 players, financial services, travel, education and even health and fitness services. With tablets being built to be reliant on cloud services and built around a touchscreen interface, this will also reduce the n eed for storage and output peripherals. Sales of monitors, printers and other computer peripherals will thus be adversely impacted by the growth of smart devices. One of the main challenges facing mobile content developers has been how to monetise content that has so far mainly been available to consumers for free. According to researcher Gartner, worldwide mobile app store downloads totalled 24.9 billion in 2011, of which 88% were free. Gaming is one of the fastest growing categories in mobile, with huge growth seen in Apple‟s iOS and Google‟s Android platforms. Mobile has brought gaming to a large audience, with many new gamers having never played on traditional gaming devices or computers.


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For marketers, the burgeoning apps market has opened up opportunities for digital advertising and given them access to huge amounts of personal data from consumers. In- app “iAds” are said to be fetching as much as five times the price of online advertising. Mobile cocooning will remain one of the key trends of the next five years and beyond, as the use of a mobile device to carry out all manner of tasks becomes second nature to consumers – especially the young “digital natives” who have grown up with smart devices. Browsing smart devices will become quicker and easier with the roll out of 4G. The extra speed and capacity will allow for much higher quality of audio and video streaming while on the move, and will open the way for a new generation of 4G ready smartphones. The future will see the emergence of new segments that bridge the gap between smartphone and tablet, such as “phablets” (large smart phones with 5 -inch/12.7cm displays) and minitablets (small tablets with 7-inch/17.8cm displays). Apple‟s iPad mini, launched in 2012, measures just 7.9 inches (20cm). The number of free and paid-for downloads is expected to soar over the next five years. Inapp purchase business models, whereby the original app is downloaded for free but customers can then pay for additional items, will help convert casual app users into paying customers.

Summary 1

The 10 Global Consumer Trends and their Impact 2012

Consumer trends

Commercial impact

Global trend 1: The search for value

Consumers shopping more online, where they can get better bargains by buying items direct Group buying websites offering limited-time deals have become popular the world over In food retailing, hard discounters have gained share at the expense of other grocery channels Rise of fixed price stores (eg dollar, pound or 100 yen stores) and discount clothing concepts (“fast fashion”)

Global trend 2: A more cautious approach to credit

Education loans have soared, due to the growing number of students and rising tuition fees The credit card market was hard hit as consumers focused on paying off debts Debit and pre-paid cards are enjoying strong growth as consumers have turned from revolving to non-revolving payment instruments Businesses offering “payday loans” and P2P lending have boomed in the face of tightening lending criteria from banks

Global trend 3: People power

Websites that give consumers a voice, such as Twitter, TripAdvisor and a host of other review sites, have gone from strength to strength Monitoring conversations about brands and engaging in dialogue with customers allows marketers to obtain valuable feedback


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Ads via social media are proving effective for creating buzz around a product Celebrity endorsement on Twitter has become a major source of new business and traffic Successful crowdsourcing initiatives are helping companies to drive brand development Global trend 4: Multicultural consumerism

Cultural diversity offers food companies opportunities to create a more diverse range of ethnic foods to appeal both to m igrants and increasingly adventurous native consumers The rising number of Muslim consumers in Europe and North America creates growing demand for Islam-friendly foods such as halal meat Growing demand for more sophisticated beauty products that meet the needs of diverse skin tones and hair types

Global trend 5: The fight against obesity

Stronger demand for weight management products such as OTC obesity products, slimming teas, meal replacement products and weight loss supplements; as well as BFY foods that offer a combination of low fat and sugar content, satiety and flavour Restaurants developing more low-calorie and reduced fat options and printing calorie counts on menus Growing demand for plus-size clothing both for children and adults Development of plant-based sweeteners. such as stevia and monk fruit extract, could lead to a new generation of low-sugar and sugar-free foods and drinks

Global trend 6: New attitudes towards growing old

Demand for anti-agers has held up well throughout the recession Hair colourants and hair loss treatments have also benefited from the desire for a younger appearance There is growing demand for health prevention products, such as supplements and functional foods positioned for cardiovascular, digestive and bone and joint health The market for non-surgical cosmetic procedures is booming, as treatments such as injectable fillers have lost their stigma and become more widely available and affordable

Global trend 7: Experience-based consumption


Consumers are willing to forego the purchase of material items in favour of experiences ranging from concert or theatre tickets, spa sessions, theme parks or weekend city breaks to more extreme activities or educational courses

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Tourism demand has remained strong, with consumers seeking more exotic destinations and more adventurous or experiential holiday packages Group buying websites have benefited from the demand for escapism and have increased the number of experienced-based daily deals Retailers and foodservice operators offering enhanced experiences such as personalised services Global trend 8: The rise of social conscience

Items such as Fairtrade certified products, free-range meats and eggs, vegetarian foods, organic and locally-sourced products and ecofriendly products are becoming more mainstream Companies are increasingly incorporating cause marketing into their strategies by partnering with charities The eco-tourism industry has benefited from a desire by consumers to reconcile their demand for adventure with their concern for the environment

Global trend 9: The chemical backlash

There is growing demand for products that are all-natural or free of artificial additives Ingredients suppliers are affected as manufacturers seek natural substances such as botanical extracts to replace chemicals or highly-processed ingredients in the food and beauty and personal care industries Natural pet foods are emerging as a growth segment within pet food markets Demand for NH food and drinks and organic packaged foods has held strong Foodservice chains are incorporating more natural ingredients into their menus Natural and organic beauty and personal care brands are infiltrating the mass market, while mainstream players such as Johnson & Johnson are eliminating potentially harmful chemicals from their formulas

Global trend 10: Mobile cocooning

Rapid growth in demand for smartphones, tablets and more recently, niches such as “phablets” (big screen smartphones) and minitablets Development of m-commerce, location-based services and QR codes Booming market for a vast range of mobile phone apps. Most are free but some demand a fee and others offer in-app purchases App culture has negatively impacted physical sales of items such as video game hardware


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and software, books, maps and CDs For marketers, the burgeoning apps market has opened up significant opportunities for digital and mobile advertising Source:

Euromonitor International

INTRODUCTION This report follows on from Euromonitor International‟s “10 Global Macro Trends for the Next Five Years” report and focuses on the latest market trends from a consumer and industry perspective. These trends are related to the wider macro trends that were identified in the first report, in that they are a direct outcome of overriding economic, demographic and environmental factors such as economic and political uncertainty, ageing populations, technological progress, urbanisation, migration and the effects of global warming. Whereas mature markets such as the US, Japan and much of Europe are faced with economic stagnation, high unemployment and an ageing consumer base, many developing markets are poised for economic growth, stemming from rising disposable inc omes, relatively young populations and increasing globalisation and urbanisation. These markets will be a key driving force for many of the consumer trends identified in this report over the next five years.

TREND 1: THE SEARCH FOR VALUE

Trend Outline Consumers want more bang for their buck One of the key outcomes of the recession was that consumers reined in their spending and became much more cautious about how, when and where they s hopped. With recovery slow and employment high, this trend has remained in place. It is likely to remain prevalent over the next five years, as thrift has become embedded in the way people shop, while economic uncertainty persists. While brands and status are still important to many, these factors have on the whole become overshadowed by the need for durability and value. Purchases are more considered and bargain hunting more aggressive. The search for value is not confined to th e stagnant markets of the West. The growing number of middle class consumers in developing c ountries are also cautious and determined to get the best value for their money, while frugality remains a respected tradition in China. Discount shopping is especially common among young Chinese people referred to as the “coupon generation”. Euromonitor survey confirms consumers‟ love of bargains Consumers‟ changing shopping habits were confirmed by Euromonitor International‟s Annual Survey of online consumers of 2011. Most respondents were found to have e ither made little change to their outgoings or had become more prudent by saving money, visiting discount stores, buying private label goods and reducing their expenditure to what was strictly necessary in areas such as technology and clothing and footwear. Furthermore, the majority of respondents (59%) agreed that they like to find bargains. This was especially high among women (64%), and among consumers in the US and UK (76% in both).


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On the other hand, respondents showed little interest in factors such as the attractiveness of retailers‟ loyalty programmes, impulse purchasing and the tendency to buy fewer high quality items, which had more of an influence before the recession. Globally, only 29%, 25% and 36% of respondents selected these factors, although a preference for buying fewer but higher quality items was notable among online consumers in Brazil and India. Chart 1

Source:

Consumer Shopping Habits 2011

Euromonitor International‟s Annual Survey 2011

Implications Less loyalty, more research The movement towards thrift and value for money has affected the consumer market in several ways, including: A trend towards online shopping, including group buying websites and “deal-of-the-day” offers. 

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A trend in the physical retail category towards discount outlets, including grocery discounters, dollar stores and fast fashion chains. A loss of customer loyalty, as consumers shop around more for the best prices. An increase in the number of special offers, especially via coupons, in both foodservice and retail.

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Increasing reliance on price comparison websites.

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Purchase of brand alternatives, such as private labels or imitation products.

Growth of online shopping Internet shopping has benefited from consumers‟ determination to obtain the lowest possible prices while not compromising on quality. Discount websi tes are often able to sell high quality branded goods or services at lower prices, either by selling direct and thus cutting out the


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middlemen, by selling surplus stock or by making deals with suppliers to sell items or services to a group of consumers for a limited time, as is the case of group buying websites s uch as Groupon and Living Social. The auction website eBay has benefited from this trend, with users selling millions of products direct to consumers at discount prices every day, including hard -to-find items. eBay has moved away from its original auction site model and now claims that around 60% of its sales are fixed price, making its marketplaces more accessible to a broader audience of s hoppers and enabling it to compete better with the likes of Amazon. In April 2011, the company reported a 16% rise in quarterly revenue and a 20% rise in quarterly profits. Amazon has also reaped the benefits of the recession and consumers‟ desire to get the lowest prices from a respected source. The key to the c ompany‟s success is its investment in good customer service, a wide product portfolio and very competitive prices. Amazon reacts to price changes by other companies very quickly and updates its own prices almost immediately, as it tries to offer the best price online. The company also benefits from its wide geographical reach. The company delivers to more than 160 countries, and has operations in seven national markets. Italy was the first new international market since 2004, opened in 2010. Amazon is now planning to open a dedicated Spanish website in the near future. It still generates the largest share of its sales in the US, where it also has the highest market share in online retailing. Group buying takes off Group buying websites create buzz by sending emails alerting subscribers to time-limited local or national offers. The rising ubiquity of mobile devices supports the trend towards group buying sites by allowing people to browse and buy vouchers directly on their phones. The concept of group buying began in China, where tuángòu – groups of individuals negotiating with a merchant for a discount on goods or services that each member of the group would then purchase – became popular in 2005. Yikuair operates via the microblogging service Sina Weibo, whose users place a small deposit to secure daily deals, which can even be made using Weibo‟s own virtual currency. Groupon started in the US in 2 008. By the time it launched in China in early 2011, there were already 2,000 such sites in that market. Revenues from tuángòu-like sites in China were estimated at US$2.5 billion in 2011, compared with US$2.7 billion for group buying sites in the US. Group buying websites have since sprung up all over the world. In addition to international businesses such as Groupon, Living Social and Travelzoo there are many national operators, such as Big Lion (Russia), Daily Deal (Germany) and CatchOftheDay (Australia). Snapdeal is the top daily deal site in India, with a 70% share of the market. Within a year of its inception, in February 2010, the company estimated that it was selli ng one voucher per minute. By early 2012, Groupon existed in 150 municipal markets in North America and 100 more around the world, including cities in India, Malaysia, Is rael, South Africa and Brazil. According to Reuters, the company more than doubled its subscriber base to 115 million during the first half of 2011. Living Social (now backed by Amazon) was active in 627 markets in 25 countries, both through expansion in countries like the UK, the Netherlands, Australia, Colombia and Uruguay, and through acquisitions of local players, including Dealissime in France, TicketMonster in South Korea and Let‟s Bonus in Spain, Italy, Portugal, Argentina and Mexico. Large organisations, such as Google and PayPal, have also entered the group-buy arena, alongside dozens of smaller local and regional companies. Group buying has been particularly successful in the China, the US, the UK, Canada, Asia and Australasia, and industry executives expected the market to double sales in the Middle East in 2012. Broad internet penetration in Latin America is also bolstering growth in that region.


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Diversifying into health While health and beauty has always been a popular deal category, promotions have in the past tended towards the beauty end of the spectrum, with offers such as haircuts, manicures and massages, or broader health-related items, such as gym memberships and personal training sessions. However, more recently savings on cosmetic or elective procedures, such as Botox injections and Lasik laser eye surgery, have begun to appear, along with more specialised health checks. Recent deals have included a full medical check-up, with blood, stool and urinalysis testing, for over 60% off the regular price; half -price flu shots; and a hugely reduced priced dental exam, with cleaning, X-rays, and teeth whitening. These are particularly popular in the US, where many people are uninsured or underinsured. A new type of group buying website recently emerged in China, Handsup.cn, which aims to hand power over to the consumer by asking them to recommend products and services they want to buy, as well as the price tag. The more users that want a particular p roduct, the higher the chance of it being available, and the lower the price. Price comparison websites The search for value has become easier with the proliferation of price comparison websites (PCWs). These work by collecting data directly from merchants, by sc anning retail/travel web pages to retrieve prices, or via a data feed file provided by a third party business. They are then able to earn commissions on click-through traffic. Competition among PCWs is fierce, and recent years have seen a significant amount of consolidation among operators. However, some analysts have speculated recently that the PCW market may be on the decline, partly due to Google‟s launch of Froogle (now Google Shopping/Product Search), and the promotion of these Google Shopping results to the top of the results page, and partly because the new group buying websites make true comparisons more difficult. Furthermore, with sites such as Amazon maintaining their reputation as offering the best value for money, some do not bother with comparing prices across other sites. Discounters benefit from no frills approach Within grocery retailing, the hard discounter model became more popular during the recession, as these stores are able to offer a range of groceries at budget prices by stocking only a limited range of goods, with a heavy focus on private label. Brands such as Aldi and Lidl stock fewer than 1,000 product lines, largely in packaged groceries. According to Euromonitor International‟s retail database, in 2012 global sales through discounters were valued at US$300.6 billion, equal to around 6% of all grocery retail sales. This represented a rise of 21% since 2007, although sales declined in both 2009, at the height of the recession, and again slightly in 2012. German discounter Aldi has been so successful in the UK market, especially with middle class shoppers, that it announced plans in October 2012 f or a multi-million pound expansion. In 2011, the company‟s turnover increased by almost 30% to £2.8 billion, following the opening of 29 stores. Aldi has planned an investment of £181 million for 40 stores by the end of 2013, taking its total number of UK stores to more than 500. In the US, discount mass merchandiser Wal-Mart also managed to maintain its market share throughout the recession by offering its everyday low price guarantee, as well as an extensive range of cheaper private label products. Fixed price stores boom Fixed price stores, known more commonly as dollar stores in the US, 100 yen stores in Japan and pound stores in the UK, have also fared well since the start of the recession and are


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expected to continue to do so over the forecast period, as the hardest hit consumers seek rock bottom prices. In the US, chains such as Dollar General (with more than 9,500 stores in 2011), Dollar Tree and Family Dollar are all thriving. Family Dollar announced in 2011 that it planned to add 300 new stores during the year, giving it more than 7,000 in 44 states. In the UK, high streets and shopping centres are being over-run with pound shops, discount fashion chains and fast food outlets to cater to the growing number of hard-up consumers. According to a report from retail consultants Trevor Wood Associates, budget brands such as Poundland, Peacocks, Card Factory, discount household retailer Wilkinson and the Greggs sandwich chain have become ubiquitous and have been among those showing the fastest growth in tenancies since 2008. Research carried out by Local Data Company found that there was a 14% increase in the number of pound shops in the year to October 2011, to 3,005. In that month, Poundland reported a record turnover of £642 million, up by 26% on the year to the end of March. Japan‟s 100 yen stores are also booming, with shoppers both local and from far afie ld being attracted by their variety of goods all set at one price, plus the ¥5 tax. 100 yen shops are found nationwide, but no official data on their actual number are available because many are small “mom-and-pop” enterprises. Chart 2

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Global Retail Growth vs Growth in Discounters and Internet Retailing 20082012


Fast fashion Value clothing concepts, such as the UK‟s Primark (owned by Associated British Foods), Germany‟s Kik and France‟s Kiabi, have also rapidly gained popularity since the start of the recession. Primark has become successful by selling large volumes of ultra-cheap clothing that appeals to low-income families, students and even middle-class consumers looking for a bargain. By September 2012, Primark had 242 stores across Europe. Such was its success in 2012 that in September, the chain opened a new London flagship s tore near Tottenham Court Road, with a capacity for almost 2,500 shoppers; while in debt -ridden Spain, it opened five new stores in


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summer 2012, bringing its total number there to 28. Primark even opened a menswear concession in two of the upmarket Selfridges department stores in the UK, proving that discount shopping has lost its stigma for good. “Fast fashion” brands have also become ubiquitous in Japan, where consumers have gone considerably downmarket in search of less costly items. The once super-stylish Harajuku district in Tokyo has rapidly transformed itself into an outdoor mall containing all the big names in casual clothing, including H&M, Uniqlo (owned by Fast Retailing), Topshop, Gap, Zara and Forever 21, with boutique stores receding to the backstreets. A loss of loyalty One consequence of the recession, as far as shopping habits are concerned, has been a loss of customer loyalty. Consumers now like to shop around for the best deal, including private labels, which are losing their stigma as a poor alternative to brands. This has caused many brands and retailers to fight back with promotions and other marketing devices in order to recover trust and loyalty from consumers. UK retailer Tesco has been particularly successful in retaining customer s with its Tesco‟s Clubcard scheme, which offers consumers tangible benefits that have been welcomed during hard times. Accumulated points are turned into vouchers sent to customers‟ addresses, which can then be used in store or be redeemed online for vouchers worth far more than their face value for an ever growing array of goods and services. Loyalty programmes such as this, which offer something substantial back to the consumer, are likely to be most successful in drawing in and retaining customers in the future, as retail competition remains tough. The Clubcard scheme now operates in Ireland, Hungary, Poland and several other countries as well as the UK, where it had over 15 million members in 2010.

Outlook Global economic prospects are still highly uncertain. Globally, Euromonitor International expects real GDP growth to amount to just over 3% in 2012, before rising gradually to reach almost 5% in 2016. However, recovery will be uneven. Economic growth in developed markets will struggle to get off the ground because of the ongoing issues of high unemployment, austerity measures and poor domestic demand. In addition to this, many economies in Western Europe are already experiencing or are about to tip into double dip recessions. If the US goes over the “fiscal cliff” in 2013, it too may experience another recession. Euromonitor International expects GDP growth in developed countries to amount to just 1% in 2012, rising to almost 3% by 2016. With economic growth slow to take off, unemployment remaining high and the prospect of rising food and commodity prices, consumers are likely to continue to remain very cautious over the forecast period, which will impact consumer spending and shopping habits. Global consumer expenditure could pick up gradually over the forecast period but is expected to grow by less than 16% at constant prices over the 2011-2016 period, while consumer prices are forecast to increase by 21%. Consumers will be prepared to spend more time searching the web to take advantage of the latest and greatest online and offline deals. This trend will benefit brands that can offer the right combination of quality and value, as well as discount shopping websites and retail chains that offer good discounts on well-known brands. Group buying websites and flash sales will continue to become increasingly popular worldwide. Chart 3

Forecast Global Consumer Expenditure and Prices 2011-2016


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Source:


TREND 2: A CAUTIOUS RETURN TO BORROWING

Trend Outline From boom to bust The economic boom that preceded the recession was fuelled largely by borrowing, as readily available cheap credit in many developed markets allowed consumers to spend without worrying about the consequences. The crunch came when interest rates and living costs began to rise, and people were no longer able to meet mortgage and other loan repayments. A sudden rise in the number of defaults caused US mortgage companies to go bankrupt and severely impacted international banks that had purchased bad debts from US mortgage companies. Many banks had to write off large losses, leading them to tighten their lending conditions. Since the start of the recession, consumers in developed markets have been prioritising the need to live within their means and have tended to acquire new credit only for larger, specific purchases. Consumers have also become more likely to repay their debt obligations, manage new credit more responsibility and rely more on existing credit cards, or switch to cash cards or debit cards in order to curb their spending. There were signs in 2012 that the personal finance market was beginning to pick up once again, partly as a result of a rise in demand from the growing middle classes in developing markets, but also due to low interest rates and pent-up demand for big-ticket items in major markets. The forecast period is expected to see consumer borrowing increase, though at a lower rate than in pre-recession times, as consumers are more cautious. Higher saving rates Attitudes towards saving and spending vary considerably from country to country. In China and India, it is customary to save a significant proportion of income – as much as 39% and 30%, respectively, in 2011, whereas in the US and UK consumers saved just 3% and 2% of their incomes, respectively. This is one reason why consumer credit developed to such a large extent in these markets, and why they were among the worst hit by the recession.


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From the start of the recession, consumers in most markets (with the notable exception of Italy) began to increase their savings rates in th e face of uncertainty. Globally, the average savings rate rose from 8% in 2006 to 11% in 2011. In Australia, the savings rate more than doubled between 2006 and 2011, from 7% to over 14%. In the US, the rate soared from just 1% in 2006 to 3% in 2011. However, there are signs that savings rates are s tabilising, and consumers the world over will resume spending – albeit cautiously – over the forecast period. Table 1

Saving Rates 2006/2011/2016

% disposable income China India Germany Belgium France Australia Thailand Spain Russia Taiwan Austria Japan Norway Switzerland Italy Indonesia Malaysia Greece Sweden South Korea Canada Netherlands Brazil Mexico Poland US Argentina UK South Africa Denmark Turkey Venezuela WORLD Source:

2006

2011

2016

34.7 28.4 15.9 14.9 14.9 7.0 12.1 10.9 12.6 15.1 7.7 9.0 2.9 9.0 12.3 3.6 9.0 5.2 1.3 9.3 5.7 5.2 4.8 8.4 5.8 0.8 1.5 -0.1 -2.0 -3.6 -0.2 -4.8 8.3

38.6 29.6 16.8 15.2 16.2 14.4 14.8 13.6 14.1 13.4 8.0 10.5 10.4 8.7 8.6 5.6 8.5 8.0 6.6 7.2 6.1 6.3 5.4 5.4 3.5 3.0 1.7 1.8 1.3 0.6 -0.1 -2.1 11.3

36.4 28.3 16.8 16.5 16.4 14.0 13.3 12.7 12.4 11.1 10.0 9.9 9.9 9.1 8.8 8.1 7.9 7.6 6.7 6.3 6.2 5.5 5.4 5.0 3.3 2.8 1.8 1.6 1.4 1.0 0.1 -1.1 11.6


Slowdown in lending A slowdown in lending has gone hand in hand with the trend towards higher savings since the start of the recession and is another indication of increased caution, both on the part of consumers and banks. Furthermore, lending legislation has been tightened in several countries since the c redit crunch, making borrowing more difficult. The EU Consumer Credit Directive c ame into force in February 2011, which entitled consumers to have up to 14 days to cancel new loan agreements


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and to have the option of making partial early repayments on loans. In addition, lenders must give borrowers standardised pre-contractual information to help them compare different loans; ensure borrowers understand the detail of their particular loan; and carry out a thorough check on borrowers‟ creditworthiness before any loan is agreed. Similarly, the introduction in Australia of both the National Consumer Credit Protection Act in 2009 and the Consumer Credit Protection Amendment (Credit Cards and Home Loans) Bill 2011 placed the onus on lenders to ensure that the borrower could afford the loan; while in Japan, the revised Money Lending Law, which was executed progressively b etween 2006 and 2010, required lending companies to reduce the maximum interest rates charged to borrowers. This caused lending volumes in Japan to decline sharply, because companies could only lend to creditworthy borrowers in order to manage their businesses with low profit margins. Furthermore, overcharged borrowers started to sue lending companies, causing many to go bankrupt, including the giant Takefuji Corporation. Between 2002 and 2011, the number of lending companies in Japan fell from 27,551 to just 2,589. Globally, the average outstanding balance per household rose by just 10% over the 20072012 period, to US$5,403. Much of this growth was fuelled by emerging markets, where the new middle class consumers now seek to enjoy their lives, a mentality which is fuelling demand for cars, flats, the latest electronic gadgets, overseas holidays and courses of study at the best universities. In order to satisfy their aspirations, many people are prepared to borrow money from banks or other non-bank lending institutions. Rising disposable incomes have led to much higher consumer confidence, as emerging market consumers now feel more capable of repaying their consumer loans. As such, the level of consumer lending increased notably in several markets throughout the review period. Credit for home lending (excluding mortgages) was worst hit by the recession, with the average balance in this category declining by 5% between 2007 and 2012, to US$1,163 per household. Card lending was also sluggish, rising by l ess than 1% over the period, to US$953 per household. Surge in education loans However, this was offset by a maj or boom in education lending. Credit balances in this category reached an average of US$955 per household in 2012, up from just US$578 in 2007. Much of this was due to the phenomenal rise in the numbers of students and the increasing cost of tertiary education in the US, the UK and o ther markets, such as Australia. In the US, student loan debt outpaced credit card debit for the first time in 2010 and student loan debt topped US$1 trillion for the first time in 2011. Over the 2007-2012 period, per household lending on education increased by 83% in the US, to US$9,112. In the UK, education lending grew strongly due to ongoing increases in university tuition fees. From 2000, tuition fees leaped from negligible levels to an upper limit of £3,290 annually in 2011. From 2012, the upper limit was raised substantially to £9,000, making education lending the only way to afford a tertiary education for many. This caused per household spending on education to surge by 60% over the review period, to US$2,978, and made Student Loans Company, a non-profit-making government-owned organisation that provides loans and grants to tertiary education students, one of the fastest growing financial companies in the UK. Education loans are expected to gain an even bigger share of the Chinese consumer lending market thanks to rising wages and growing purchasing capacity, as well the Chinese government placing the housing and auto lending markets under stricter control. Signs of change Recently, with interest rates at historic lows in several markets and no signs of rising in the near future, credit has begun to pick up slowly. It was reported that there was a surge of


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borrowing in the UK in September 2012, with consumers taking on £1.7 billion of debt during the month via credit cards, overdrafts and personal loans. Some analysts saw this as a sign of renewed consumer confidence following the UK‟s exit from recession in the third quarter of 2012. Meanwhile, the new middle class consumer base in emerging markets such as China, Brazil and India are discovering the joys of spending and are taking out loans or credit to fund a range of big ticket items. In India, there have been many initiatives developed with the aim of reaching the unbanked population through the offer of micro-finance, mainly by non-bank financial entities. During 2011, RBI developed new directives which ensure that the majority of this micro-lending is for the purpose of income generation, so that the unbanked population have more opportunities to take advantage of the rapid growth in the Indian economy. RBI has also established guidelines which limit the liability of individual households seeking micro-finance to below Rs50,000. Chart 4

Source: Note:

Consumer Credit: Global Outstanding Balance per Household 2007/2012

Euromonitor International Excludes mortgages

Implications Impact on financial cards A preference for debit or pre-paid payment methods has emerged as consumers turn to nonrevolving rather than revolving payment instruments. The number of financial cards with a debi t function soared by 69% over the 2007-2012 period to 6.1 billion, while pre-paid cards increased by 63% to 2.1 billion. By contrast, the recession had a severe impact on the market for credit cards, with the number of cards in circulation increasing by just 13% globally to reach almost 2.1 billion. According to a report by Packaged Facts published in June 2012, prepaid debit cards are a rapidly growing industry in the US, with payment volume expected to rise by 22% in 2012 to US$247.5 billion. Prepaid debit cards are positioned as an attractive alternative to traditional bank accounts for certain segments of the population, especially those without a checking or savings account and those reliant on alternative financial services such as non-bank money


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orders, check cashing, rent-to-own agreements and payday loans. It is estimated that 25% of Americans are either under- or unbanked. Prime prepaid card candidates include young people and migrants. In the US, Wal-Mart, which has long catered to the needs of unbanked consumers, launched a new prepaid card, Bluebird, in partnership with American Express in October 2012. The card, the launch of which was supported with national TV advertisements, has no minimum balance requirement, does not require a credit check and can be used both as an ATM card and to pay bills. Each account comes with a free a pp that will allow people to use their smartphone to pay bills, make deposits with photo capture, set up alerts and manage accounts via a mobile device. Funds never expire, and there is no fee for a lost or stolen card. Table 2

Number of Credit, Debit and Pre-paid Cards in Circulation 2007/2012/2017

Million cards

Debit function Pre-paid function Personal credit cards Source:

2007

2012

2017

% growth 2007/12

% growth 2012/17

3,615 1,295 1,829

6,102 2,114 2,071

8,126 2,924 2,568

68.8 63.3 13.2

33.2 38.3 24.0


Chinese take to credit cards There was a significant difference in the performance of credit cards from market to market during the review period. In China, personal credit card usage rocketed, with the number of cards in circulation growing by 237% to over 297 mill ion. The concept of credit is quite new to China, but the generation born in the 1980s and 1990s are now more open to card lending and regard it as fashionable way to pay. As the purchasing power of the Chinese grows, consumers increasingly have turned to card lending as a way to fund big-purchase items. France, too, has seen a strong rise in credit card usage, with the number of personal credit cards in circulation increasing by 127% over the review period, to 10.2 million. Consumer credit is, historically, much less developed in France than i n other developed countries, but recent growth has been driven by the development of “combo cards”, which make revolving credit directly available on the user‟s everyday card, combining debit and credit functions on one card. Following the launch of the first combo card in 2008 (Double Action by Crédit Agricole), the major retail banks have developed similar offers. The concept of credit cards is even less developed in Germany, but card lending profited over the review period from rising competition between banks that began issuing cards with credit as well as debit functions, such as Santander‟s Clever Card and West LB‟s Payback Maestro card. As in France, these cards function similarly to regular debit cards that are linked to a current account with an overdraft credit, but differ in the designed use as they are meant to be used for shopping and cannot be used for banking purposes. Interest rates charged on these cards are usually lower than interest rates on overdraft credits. In the UK and US, which are traditionally very high users of credit cards, card circulation plummeted over the 2007-2012 period, by 21% and 29%, respectively. In both countries, consumers sought to pay off loans and credit cards, and many destroyed their existing cards, or switched to debit cards or pre-paid cards to avoid temptation. Many UK consumers, however, still rely on their credit cards for grocery purchases in the last week before payday. Chart 5

Leading Growth Markets for Personal Credit Cards 2007/2012


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Source:


New types of lending emerge With mainstream consumer credit products becoming increasingly difficult to obtain over the review period, consumers began to explore less traditional products. While they were keen to reduce their debts, rising living costs made this aim unachievable for many. Consequently, a growing number of consumers were forced to turn to “payday loans” or peer -to-peer (P2P) lending in order to make ends meet. Payday loans are especially popular in the UK. This is a short-term method of borrowing, with small sums lent at phenomenally high rates of interest. Repayment is taken automatically on payday, with the lender already being supplied with a cheque or authorisation to make an automatic withdrawal from the borrower‟s bank account. By the end of the review period, an estimated 200 lenders offered payday loans in the UK, including high street names such as The Money Shop (Dollar Financial Corporation) and internet-/telephone-based operators, such as Wonga. Payday loan companies have been criticised for causing consumers – especially the young – to become locked into a serious debt cycle, as many take out further loans when they cannot pay back the original one. In November 2012, the Consumer Credit Counselling Service reported that during the first six months of the year they were contacted for help by 7,861 under40s, up from 1,626 for the whole of 2009. Wonga, which charges interest at an APR of over 4,000%, has come under criticism for its shirt sponsorship of Newcas tle United football team, due to concerns that it may tempt young fans in to debt. Wonga made a substantial pre-tax profit of £62.4 million in 2011. Payday loans have also emerged in Australia, as major banks have pulled back from personal loans. These are offered either by pawnbrokers such as Cash Converters, or specialists such as Cashfirst, an online lender owned by the Thorn Group.


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Peer-to-peer lending P2P lending, defined as lending through non-traditional channels, such as friends, family or online, either with or without a formal contract, has increased significantly in recent years. In a down economy, this type of lending can benefit both the lender and borrower, as it enables consumers to secure a loan where they have been turned down by a formal institution, and enables wealthier consumers to make better returns on investments when interest rates are low. P2P lending also suits the large number of unbanked immigrants in developed markets. P2P websites are a blend of social networking sites and online auction sites, connecting small-time lenders with small-time borrowers. All borrowers are credit rated, with sites offering a risk rating. Those with a higher risk rating p ay a higher interest rate and could thus offer lenders a higher return on their money. However, those with a higher risk rating are also assumed to be more likely to default. Online P2P lending started in the UK in 2005, and spread to the US, Germany and other countries. Zopa, the largest P2Pplayer in the UK, states that is has around 25,000 active lenders and 16,000 borrowers, and claims to lend out millions of pounds each month. Many new players are also entering the fray. Yes Secure, Funding Circle, Rate Setter and Quakle launched sites in 2010, while ThinCats.com was launched at the start of 2011. A survey conducted by Aviva in 2011 found that 31% of UK families were providing financial support to relatives or friends, with the average subsidy totalling £442 per annum. These were generally linked to unexpected changes in circumstances, notably unemployment, or to meeting one-off expenses. However, the most common recipients of this financial assistance were not the young, as might be expected, but parents borrowing from children (17%). Prosper Marketplace Inc, the first such US P2P lender, reported a 179% increase in volume in 2011, and by 2012 had almost 1.4 million members funding US$369 million in loans. P2P lending also became popular in China following the tightening of bank credit in 2010. China National Radio reported in May 2012 that more than 2,000 websites had been set up nationwide since 2007, reflecting the growth of the country‟s unregulated US$2.4 trillion “shadow-banking” system. China‟s P2P lenders allow individuals to invest a minimum of RMB50 in projects ranging from small business expansion to funding newlyweds‟ honeymoons, for as much as 23% interest, the maximum permitted under Chinese law. According to an article in Bloomberg in July 2012, online loans increased 300-fold to RMB6 billion in the first half of 2011. A pioneer of P2P lending in China is CreditEase, established in 2006, which has now become a provider of wealth-management services, credit ratings and rural financing. Another, Ppdai, which was set up in 2007, now has more than 1.1 million registered users.

Outlook Slow recovery of credit Lending criteria are expected to remain strict at the start of the forecast period. Following the economic downturn, banks are likely to remain cautious in their approach to lending, with many consumers thus struggling to obtain loans from mainstream sources. Nevertheless, interest rates will probably remain low during the forecast period, as governments encourage people to spend in order to stimulate economic growth. This, combined with pent-up demand for big ticket items and the increased take-up of credit in emerging markets, will boost consumer lending over the next five years. The increasing aspirations of the new middle class consumers in emerging markets will be a key driver of growth in consumer lending in these markets during the forecast period. Overall, the glob al balance of consumer credit is predicted to increase by 24% in constant value terms between 2012 and 2017.


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The China Bank Regulatory Commission is expected to approve the entry of foreign companies in consumer credit, despite existing regulations. The flexibility of foreign banks and other non-bank lenders, plus the wide range of products, which goes beyond small loans used to purchase consumer electronics and household appliances to include overseas education and wedding ceremony loans, ensures that such an entry is essential for China to sustain its economic growth and stimulate domestic demand. Education lending will remain buoyant Education lending will continue to see the strongest growth globally, due to the introduction of higher tuition fees in several markets, combined with the greater number of students entering higher education as a result of a continuing lack of prospects in the job market. The global balance for education lending is forecast to leap by 3 7% in constant value terms between 2012 and 2017. In the UK, from the 2012 academic year, universities have been able to charge up to £6,000 per annum, with an upper tier of £9,000 per annum for universities ensuring access to lowincome students. Average debts are thus predicted to reach £53,000 for UK students starting in 2012, double the figure for 2011, according to a survey by The Push university guide. In the US, if Congress fails to expand the availability of federal student loans and grants, private education lending will begin to grow rapidly during the forecast period, especially once capital markets return to full strength and the number of lenders offering private education loans increases. Card lending is predicted to see real valu e growth of as much as 21% over the forecast period, after having declined slightly in constant value terms over the 2007-2012 period. Credit unions may put pressure on provide the ideal solution With many people prevented from borrowing due to tightened lending criteria, and consumers becoming increasingly desperate for loans due to ongoing unemployment and rising prices, alternative methods of borrowing, such as payday loans a nd P2P lending, will become more widespread. Stricter regulations may be introduced for payday loans and for P2P borrowing during the forecast period. In the UK, the Office of Fair Trading began an in vestigation into payday lenders in March 2012, while there were also calls for these lenders to be forced to limit the rolling over of loans, to prevent customers from switching from one lender to another and to share customer information with other lenders. In the UK, credit unions may become more popular in the future, as living costs rise and wages remain stagnant. Once considered a poor man‟s option, these are being increasingly used by higher income consumers in both cities and small towns. In November 2012, the UK‟s The Guardian newspaper reported that London Mutual Credit Union had begun an initiative in the not-for-profit category to take on payday loan companies. Within the area of London in which it operates, London Mutual offered 1-3-three month instant cash loans through CUOK!, at an interest rate of just 27%. With 400 credit unions in the UK, this type of service could become far more common in the future. Chart 6

Global Consumer Credit Balance: Forecast Growth by Category 2012/2017


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Source: Note:

Euromonitor International Excludes mortgages

TREND 3: PEOPLE POWER

Trend Outline Word-of-mouse In a new age of cautiousness and considered purchasing, consumers no longer take marketing at face value. Individuals are increasingly taking it upon themselves to carry out their own research, make their opinions known and take a more active role in product development and promotion. Since the arrival of Web 2.0, consumers have become ever more trusting of the views of strangers. Regardless of whether they eventually buy over the internet or at a physical store, a growing number of consumers now research products, services and companies online first by studying customer reviews, and this has become a powerful driver of current consumer behaviour. Add to this the constant tweeting of opinions and brand endorsements via Facebook and it seems that consumer power is at its peak. The findings of the Local Consumer Review Survey (2012) by BrightLocal.com, conducted from January to March 2012 and involving 2,862 consumers in the US, Canada and UK, revealed a positive shift in consumer trust and appreciation of on line reviews between 2010 and 2012. Around 72% of consumers surveyed said that they trust online reviews as much as personal recommendations, while 52% said that positive online reviews make them more likely to use a local business. According to the survey results, 46% of consumers had read reviews of restaurants/cafés, up from 31% in 2010; while 22% had read reviews of hotels, B&Bs or guest houses, which was down from 26% in 2010. Reviews of doctors and dentists shot up from 11% in 2010 to 21% in 2012. In addition, Euromonitor International‟s Annual Survey of online consumers of 2011 revealed that 25% of all consumers globally read online reviews regularly (at least once a week). This was highest in the developing markets of China, India and Brazil (at least among the relatively


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affluent consumers who took part in the survey in these markets), at 39%, 38% and 36%, respectively, and lowest in France at just 11%. Chart 7

Source:

“How Often Do You Read Online Reviews?”, by Country 2011


The impact of Twitter The microblogging site Twitter gives everyone a chance to make their voice heard. From reporting news to broadcasting thoughts, sharing ideas and organising protests, Twitter has come to shape public opinion and change the way the world communicates and collaborates. From its launch in 2006, Twitter has come a long way. It now has over 100 million active users, with thousands of new users signing up each day. The average number of tweets sent per day rocketed from 50 million in 2010 to 230 million in September 2011. Young people are the most prolific users of Twitter. According to research by Live Science, 18% of users in the US were aged 18-29, 14% were 30-49, 8% were 50-64 and 6% were 65+. As many as 55% of Twitter users now access the site from their mobile phones. Twitter has contributed to the growing influence of cel ebrities, and is also playing an ever more powerful role in political campaigns. The most followed celebrities on Twitter in 2011 were pop stars Lady Gaga and Justin Bieber (14.0 million and 13.0 mi llion, respectively), and Barack Obama (10.3 million). Twitter played a significant role in the US election of November 2012. Candidates used it to get out their messages and political reporters used it to inform and entertain. On election night there were more than 31 million election-related tweets. As it became evident that Obama had won the race, he tweeted “We‟re all in this t ogether. That‟s how we campaigned, and that‟s who we are. Thank you. -bo.” Crowdsourcing Companies are taking advantage of the trend towards consumer collaboration by employing crowdsourcing techniques, whereby consumers are consulted about their experience of a product or on the design or marketing of new products – sometimes with rewards. Many


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companies report that consumers enjoy being part of the product development process and l ike to be heard regarding feedback on products they use. Furthermore, such campaigns often hold a fun element. A recent example of a successful crowdsourcing initiative was PepsiCo‟s DEWmocracy campaign for its Mountain Dew brand in 2010, which put consumers in charge of creating new flavours, naming them and developing packaging and marketing ideas. Over 100,000 people submitted and voted on the preferred designs, resulting in the launch of a new flavour, White Out. Similarly, Starbucks runs My Starbucks Idea to crowdsource innovation for new products and customer experiences.

Implications Tourism and foodservice rely on positive feedback The growing importance of consumer contributions, in terms of public feedback, reviews and ratings, has had a significant impact on the foodservice and tourism industries in particular. Globally-renowned websites such as Tripadvisor.com have given small, independently-owned businesses the chance to dramatically boost footfall and increase revenues on the basis of traveller recommendations. Many of these businesses would have been unable to afford any publicity themselves, let alone the kind of global exposure they obtain from a site like TripAdvisor. A recent study by US economists found that when a restaurant rating improved by just half a star on the ratings site Yelp.com it was very much more likely to be full at peak dining times. In September 2012, University of California economists Professor Michael Anderson and Professor Jeremy Magrude published findings in the Economic Journal that studied the impact of positive online ratings on 328 restaurants in the San Francisco area. Restaurants were given a rating on the site between one and fi ve stars, and the study found that those with an i mproved rating of just half a star sold out thei r 7pm bookings on up to half of the days th ey were open. The study found that when a restaurant moved from 3.5 sta rs to 4 stars on the website, the likelihood of it selling out during its busiest trading times rose by a substantial 20%. According to US-based research company BIA/Kelsey, around 24% of small and midsize businesses in the US currently monitor what is being said about them online. Small and midsize businesses were expected to spend US$700 million on tools or platforms to monitor customer opinions on the internet in 2013, which was more than double the spending in the past 12 months. The problem of false reviews Concerns that retailers and restaurant owners are seeking to manipulate online ratings systems are still a key issue i n the industry. However, consumers are becoming more savvy about differentiating between true and false reviews, by checking reviewers‟ review history, by considering the authenticity of the reviewers‟ experience or by taking heed of website warnings. For example, TripAdvisor flags up hotels that it suspects have planted enthusiastic reviews on its website. Some businesses pay companies to help them eliminate bad reviews. US-based Profile Defenders, for example, charges US$5,000 to “get rid of unwanted Yelp results”. Other online reputation companies try to hide bad reviews by boosting the search rankings of more positive information about a company. Tactics include publishing a series of online releases filled with positive news about the business and creating micro-websites about a business‟s products as a way to divert online search results from the negative reviews. Free s ervices, such as Brandify by Microsoft and another by Yahoo, scan social media sites for mentions of a business. Owners can then follow up on any complaints directly with customers.


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Making the most of social media It has become almost essential for companies to incorporate social media into their market strategies in order to reach today‟s ever -connected audiences. Marketers are realising that monitoring conversations about their brands and engaging in dialogue with customers are the most useful ways to obtain valuable feedback; while advertisements via Facebook, Twitter and YouTube can be tremendously effective as tools to impart news about new product developments, create a buzz around a brand and generate publicity by getting people talking. According to Bloomberg, social media ad spending was expected to reach a total of US$4.8 billion at the end of 2012 and US$9.8 billion by 2016. Pepsi is a particularly strong advocate of putting conversation at the centre of advertising. In 2012, the company partnered with Twitter to launch its “Live for Now” campaign. This makes use of Twitter‟s real-time data to develop programming for the first time. As well as offering followers of @pepsi the chance to listen to weekly free music downloads from Amazon MP3 and download free codes for the store, fans can also watch a weekly video series based on the top music and artists trending on Twitter. The idea is to prompt conversations about the music, thus creating a more sharable, interactive experience. Pepsi followed this up by staging four major live-stream concerts by artists with large Twitter followings, which viewers could not only view on Twitter but also influence. The campaign was successful in that, according to Pepsi, among music enthusiasts on Twitter, 30% of them talked about Pepsi in 2012, versus around 13% in 2011. Celebrity endorsement is big business Celebrity endorsement on Twitter has been shown to have a huge impact on a brand‟s sales, and has become one of the most important sources of new business and traffic. According to Vulture, rapper Snoop Dogg makes US$8,000 for a single tweet, while Kim Kardashian gets paid $10,000. However, companies using celebrities to endorse their brands on Twitter run the risk of coming across as insincere and upsetting fans. In June 2012. Nike became the first company in the UK to have its Twitter campaign banned, after the advertising watchdog the Advertising Standards Authority decided that its use of the personal accounts of footballers Wayne Rooney and Jack Wilshere did not make it clear enough to the public that their tweets were advertisements. One of the tweets in question, posted by Rooney to his 4.37 million followers, was: “My resolution – to start the year as a champion, and finish it as a champion..#makeitcount gonike.me”. The merits of crowdsourcing Successful crowdsourcing initiatives have helped many companies to drive brand development, and this is a method that will be employed increasingly in the future. Facebook, in particular, offers immense opportunities for marketers to engage consumers through crowdsourcing efforts. Not only does this technique allow companies to tap consumers for new ideas, it has also been proven to result in greater customer satisfaction and can increase positive word of mouth by participants. In late 2011, for example, Harley Davidson launched a crowdsourcing initiative as part of its strategy to make the company more “customer -led”. Its “Fan Machine” app allowed Harley-Davidson‟s Facebook community to review advertising briefs, submit creative ideas and vote on other fans‟ suggestions. Crowdsourced apps With the development of geolocation services, there has recently been a boom in crowdsourced travel apps, which aim to connect people in order to help avoid potential trust


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issues with anonymous online reviews and to ensure the most up to date and accurate information. One example of this is Localmind, an app that allows consumers to ask questions – not necessarily travel-related – of local people in any location around the world. Localmind allows people to ask questions of users checked-in at any location or venue. Users sign up using their Foursquare, Gowalla, or Facebook Places account. Whenever they check in with their location-based service on Localmind, they can be sent a question about that location, such as how crowded it is or which specials are being offered. Users can send follow-up messages and also accrue “karma points” for helping others. Another company, Australia-based Flightfox, launched its crowdsourced flight search platform in Februar y 2012, which allows a team of “flight hackers” to compete to find cheap flights for travellers. Travellers post their travel plans on Flightfox and offer a finder‟s fee, which is a minimum of US$29. The flight hackers then send the cheapest fares they can find, and the traveller chooses the best from among the fares. Flightfox claims to save travellers over 20% on flights, along with the time it would take them to search. Since launching, the company has amassed over 6,000 users and paid out tens of thousands in finder‟s fees to flight hackers around the world. Another app, Tripbirds, aims to help travellers get advice exclusively from their online friends; while TripAdvisor also recently launched a feature that shows people “Friend of a Friend” travel recommendations based on their Facebook contacts.

Outlook With the world becoming ever smaller and consumers turning in their droves to social media sites to discuss their ideas and opinions, and to review forums to make buying decisions, the power of consumers to influence both each other and brands will become ever greater over the next few years. There is much debate about the validity of online ratings and reviews, but the fact is that these are assuming a greater importance within consumers‟ buying decisions and are likely to continue to do so over the forecast period as more people come online and come into contact with sites offering respected reviews, such as Amazon or TripAdvisor. Consumers will also become more savvy about how to spot fake reviews o r about ignoring people with an obvious grudge or who just happen to have had an isolated unfortunate experience. One of the main drivers of consumer collaboration will be increased internet usage, especially via mobile devices which enable instant or consta nt connection. Globally, the number of internet users almost doubled over the 2006-2011 period and is expected to increase by a further 31% over the next five years to 2016. The future will see a growing number of consumers access the internet from smart devices such as phones and tablets. Chart 8

Number of Internet Users 2011-2016


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Source:


TREND 4: MULTICULTURAL CONSUMERISM

Trend Outline Greater ethnic mix Euromonitor International‟s “10 Global Macro Trends for the Next Five Years” r eport revealed that societies are becoming more multicultural, as developed markets continue to see an influx of migrant workers and foreign students, while existing ethnic populations expand. The US is perhaps the best example of an integrated society, since in 2012 it was reported that for the first time in history, more than half of all b abies born in the country were members of minority groups. According to the Census, Hispanics, Blacks, Asians and other minorities accounted for 50% of births and 50% of all children under five in 2011. Asians were reported in 2012 to have surpassed Hispanics as the largest wave of new immigrants to the US. There are currently a record 18.2 million people of Asian descent in the US, according to a 2012 study by Pew Research Center. Some 430,000 Asians (equal to 36% of all new immigrants, legal and illegal) moved to the country in 2010, compared with 370,000 Hispanics (31%). Europe is also becoming an ever greater melting pot, as many economic migrants and asylum seekers wind their way to the Western states in search of work. Germany has the largest number of foreign citizens in Europe (7.2 million in 2011, of which some 3.5 million are from Turkey); while France is home to more than 2.5 million people with at least one grandparent from the Maghreb region (Algeria, Morocco and Tunisia), corresponding to almost 6% of the population. However, more recently, France and Germany, like the rest of Western Europe, have seen an influx of immigrants from Eastern European countries, such as Poland. The largest ethnic group in Italy are Romanians, with more than one million being registered as living there, followed by Albanians and Moroccans. The provisional results from the UK Census of 2011 has found that the population of England and Wales had grown by 7% over the decade to 56.1 million, and that immigrants accounted for


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55% of this increase directly and indirectly (through the higher number of babies being born). London‟s population was found to have grown the most. The population of Tower Hamlets, a borough in East London that is home to many recent and longer established immigrants, grew by over a quarter. While Asia in general attracts fewer immigrants, the number of non -Korean people in South Korea has risen substantially in recent years. Most of these are from other parts of Asia, including China. Australia is another developed country whose ethnic composition is changing rapidly, impacting its culture and consumer lifestyles. Initial results from the 2011 Census show that only 70% of the population was born in Australia. While many foreign-born residents are British, New Zealanders and South Africans, a growing number are from China and Hong Kong (393,000 in 2011), India (295,000) Vietnam (185,000) and Philippines (171,000). The largest single Muslim ethnicity in Australia is the Lebanese community, which numbers 76,000. Most Asian and Lebanese people are located in the large cities, such as Sydney and Melbourne. Minorities gain economic clout More important perhaps than the growth in migrant numbers is the fact that minority groups are becoming more economically empowered. Companies have increasingly realised the importance of focusing on ethnic consumers, as these groups currently hold a significant amount of buying power and are expected to grow substantially in the coming years. A 2011 joint study by Yahoo! and Mindshare found that ethnic minorities in the US represent some US$2.5 trillion in buying power and are accounting for a steadily increasing proportion of the middle class. Ethnic groups are more integrated than was previously the case. As societies become more liberal, governments make more efforts to reduce racial discrimination and prejudices. Furthermore, inter-racial marriage is far more common than before. According to the United States Census Bureau, the proportion of inter-racially married couples increased from 0.7% of the population in 1970 to 3.9% in 2008. A 2012 study of ethnic minorities in the US by Pew Research Center, which interviewed a sample of over 3,500 Asian Americans aged 25-64, found that Asian Americans are the highest income and best educated racial group in the country. 61% of those who have come from Asia in recent years have at least a bachelor‟s degree. They are more satisfied than Americans in general with their lives, finances and the direction of the country, and they place more value than other Americans do on marriage, parenthood, hard work and career success. Asian Americans were found to be more likely than all American adults to be married; and their newborns are less likely than all US newborns to have an unmarried mother (16% versus 41%). The study also found that today‟s Asian Americans do not feel they are subjected to racial discrimination or treated as outsiders in the same way as their predecessors were. Overall, more than 80% of Asian Americans said their group gets along either very or pretty well with whites, while just 13% of Asian Americans considered discrimination to be a major problem. Among US-born Asian Americans, 65% said they feel like “a typical American”, although only 30% of all immigrants said the same. In Germany, Turkish consumers are a large and important consumer group, with around 720,000 Turkish households, estimated to spend some €2.3 billion on consumer goods annually. However, the more recent wave of immigrants from Poland are now the best educated minority in Germany, with two thirds of Polish immigrants having secondary or higher education. The age profile of ethnic minorities also tends to be relatively young, as their growth has been fuelled by an influx of younger migrants into developed markets, while fertility rates tend to be higher among this demographic. Analysis of Census data found that British-born mothers produce fewer babies on average (1.9) than foreign-born mothers (2.5), who now account for a


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quarter of all births. As populations continue to age, ethnic minorities will make up an increasing share of the working population and will therefore drive demand f or a number of consumer products and services. Religious diversity Developed markets are also becoming more diverse in terms of religious identity, as a result of migration from non-Christian countries. This is having a notable impact on various consumers markets. There are now more than 20 million Muslims in Europe, and their number is growing rapidly due to their higher fertility rates, combined with Europe‟s ageing indigenous populations. In the Netherlands, one million out of the country‟s 17 million people are Muslim, while Muslims account for as much as 7.5% of the French population. Although Muslims only make up 1% of the US population, they are growing in number and tend to be more highly concentrated in urban areas. This consumer group has become a more important focus for marketers, with their estimated purchasing power of more than US$12 billion annually. While Muslims may have their origins in a variety of countries, the religious laws binding this consumer group creates a common demand for certain types of product, such as halal food, Muslim dress and Islamic banking, while Hindus contribute to demand for vegetarian foods and Jews to kosher products. Table 3

Selected Religions by Country 2010

% population Argentina Australia Austria Belgium Brazil Canada China Denmark France Germany India Indonesia Italy Japan South Korea Malaysia Mexico Netherlands Russia South Africa Spain Sweden Switzerland Taiwan Thailand UK US Venezuela Source: Note:

Muslim

Buddhist

Hindu

Jewish

1.5 1.7 4.2 4.0

0.1 2.1 0.1 0.3 0.1 2.5 19.0 0.1 1.0 0.7 0.8 0.4 0.2 71.4 23.2 21.0 0.1 0.5 1.2 – – 0.2 0.3 93.0 95.0 1.2 2.0 0.2

– 0.7 0.1 0.1 – 1.0 – 0.1 0.1 0.1 80.5 1.8 0.1 – – 6.3 – 0.6 0.5 – – 0.1 0.4 – – 1.0 0.4 –

2.0 0.4 0.1 0.5 – 1.1 – 0.1 1.0 0.3 – – 0.1 – – – 0.1 1.3 0.5 – 0.1 – – – – 0.5 2.5 –

2.0 1.5 3.0 7.5 3.9 13.4 85.1 1.4 0.1 0.1 57.0 0.3 5.6 12.0 1.5 2.3 3.0 4.3 0.3 4.0 2.7 1.0 0.4

Euromonitor International from various sources In Japan, Buddhist includes those that describe themselves as also being Shinto (but excludes those that follow only Shinto)


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Implications Eating habits become more adventurous Growing multiculturalism has impacted eating, shopping and leisure habits within developed markets, in terms of the increased array of ethnic foods on offer within supermarkets and foodservice outlets, as well as changing music and fashion tastes. The line between food designed for consumption by ethnic consumers and mainstream foods with an ethnic flair has becoming increasingly blurred. Some foods, such as Indian curries in the UK and Mexican food in the US, have become national s taples. In general, Western consumers have become more adventurous eaters, partly as a result of th e growth in ethnic populations, who typically drive demand for spicier and more exotic foods, but also due to increased exposure to other cuisines through travel, television and the internet. In the US, ready meals and packaged sauce companies, inspired by the growth of Asian and Mexican restaurants and food trucks, have introduced more Asian and Latin flavours in recent years. Indeed, according to Euromonitor International‟s packaged foods database, spicy chilli/pepper sauces registered the highest total volume sales growth in sauces, dressings and condiments in the US in 2011, with Thai sriracha sauce seeing particularly rapid growth. In 2011, current value sales of Mexican and Asian frozen ready meals in creased by 12% and 10%, respectively, to reach US$1.1 billion and US$1.2 billion, while Asian chilled ready meals grew by 8% to US$337 million. Sales of spicy chilli/pepper sauces grew by 47% over the 2006-2011 period, while sauces, dressings and condiments, overall, grew by just 14%. The trend for spicier foods with an ethnic feel has even extended to include chocolate confectionery and savoury snacks. In the US, Frito-Lay introduced Cheetos Mighty Zingers in Sharp Cheddar & Salsa Picante in 2010, and Tapatio-flavoured Doritos and Cheetos Crunchy Fiery Fusion line in 2011. ConAgra Foods introduced ACT II popcorn in Queso Jalapeño and Salsa Valentina (a popular snack sauces in Mexico) flavours in 2011. Celebrity chefs popularise exotic ingredients In the UK, too, demand for ethnic foods is substantial and growing. While this was once a niche category that appealed to a limited range of consumers, the wider range of ethnic consumers, as well as increased foreign travel and growing use of exotic ingredients by celebrity chefs, such as sumac, kaffir lime leaves or tamarind, has opened up demand to a much wider audience. The market for ethnic products in UK supermarkets was worth £244?million i n 2011, up by 15% over the previous year. Morrisons reportedly saw a 600% ri se in sales of ethnic foods over the last five years and Marks & Spencer is expanding its “international brands” range, launched in 2011. Tesco even has a web page dedicated to Polish consumers, and in February 2012, the company introduced West African and South Indian foods to join other foods f rom Poland, Greece, Cyprus and the Philippines, bringing its number of “authentic” ethnic lines to around 3,200. In September 2012, supermarket chain Asda confirmed its dedication to developing ethnic food ranges by renewing its three-year relationship with the World Food Awards. Ethnic trendsetters Producing foods aimed specifically at ethnic shoppers is not the same as producing ethnic foods aimed at the whole market, as it involves making a dedicated effort to get to know the consumer‟s culture and to acquire a solid understanding of their product requirements, purchasing habits, attitudes and drivers. Food companies are realising this and are bringing out products targeting specific ethnic groups in the same way as beauty companies.


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In adapting foods for ethnic consumers, some companies have inadvertently sparked trends in general consumption. For example, when McDonald‟s – which has been a pioneer of ethnic advertising since the 1960s and claims that minorities represent about 40% of its customers in the US – learned in 2010 that African-Americans liked the sweeter, weaker caramel mocha that it had introduced in some outlets, it started offering such blends everywhere, with great success. Similarly, its mango and pineapple smoothies, which were desi gned with the Hispanic market in mind, quickly overtook strawberry banana as the traditional favourite. Chart 9

Source:

Sales of Spicy Chilli/Pepper Sauces in the US 2007/2012/2017


Religious preferences create new demand Food markets in the West have also been increasingly impacted by religious preferences. One of the most obvious examples of this is halal foods, favoured by Muslims, as well as the preference for lean lamb and chicken among this consumer group. Halal foods, a global market worth around US$650 billion annually, is a cause of controversy and suspicion among non-Muslims and is therefore avoided by most multinationals. In France, far-right politician Marine le Pen criticised Muslim slaughtering practices in 2012 and claimed that French shoppers were unknowingly buying halal meat. Muslims, on the other hand, complain about high prices as demand is still outstripping supply in many areas. In June 2011, the Dutch parliament voted to ban the no-stun slaughter of livestock, although a clause was introduced which would allow Jewish and Islamic groups to continue to apply for permits for slaughter, provided that they can prove that animals do not suffer more during ritual killing than in an ordinary slaughterhouse. In Western markets, the retail distribution of fresh halal meat is still primarily the domain of small, specialist family butchers. However, in France, where there is a large and growing Muslim community, supermarkets in certain multi-ethnic areas are clamouring to cater to the demands of Muslim shoppers by offering halal and other Arabic products, from milk and pastries to frozen lasagne, hamburger meat and even foie gras. France‟s halal market is estimated to be growing by 10-15% per year, with sales generally peaking around Ramadan. In 2012, a leading


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Ramadan halal meat brand, Isla Delice, launched a national TV campaign for the first time. Retailers report that even non-devout Muslims are likely to select halal over non-halal products if given the choice. In the UK, too, some supermarkets have begun to offer halal meat. In 2009, Asda began trialling its first World Food Store in Hounslow, featuring a concession by a local halal butcher. Providing halal meat through concessions operated by trusted neighbourhood butchers is a format likely to enjoy a degree of success in appropriate locations. There is an increasing number of “Muslim-friendly” restaurants in some markets, and this trend is likely to develop. McDonald‟s already has restaurants in the US which serve halal Chicken McNuggets and McChicken sandwiches. In the UK, chicken fast food chains such as Dixy‟s Fried Chicken, Chicken Cottage and Perfect Fried Chicken use halal chicken. In France, the first halal fast food outlet targeting a mainstream French audience opened in Paris in 2009. Bouche Et Plaisirs overtly promotes its use of halal food and ingredients, while not restricting itself solely to Middle Eastern specialities. Instead, the outlet offers a wide range of popular meals including burgers, soups, pasta, kebabs and roasted quails. Ethnic beauty The growing number of ethnic consumers has also created demand for beauty products that meet the needs of diverse skin tones and hair types. While the major manufacturers and retailers have in the past been accused of not doing enough to cater to ethnic consumers, attitudes are beginning to change as marketers have realised the value of this market. Skin care products designed for black consumers typically address problems of hypopigmentation, ashy skin and oily, acne-prone skin. The American Academy of Dermatology (AAD) estimates that 5-6 million African-Americans experience a skin pigmentation condition at some point in their lives, the most common of which are melasma, vitiligo and solar lentigo. As a result, fade products, moisturisers and acne products are all popular among black consumers. Asian consumers suffer frequently from hyperpigmentation and acne-prone pores, as well as other problems such as high sensitivity to certain ingredients, blemishes and sun damage. Asian women look for products with natural lightening ingredients such as songyi mushroom extract, beta-glucan, goat milk, kinetin and beta-sitosterol. Ethnic colour cosmetics are also growing in demand, as women look for foundations that match their skin tone and skin type more exactly. Foundations containing titanium dioxide, a pigment base found in many cosmetics products, can cause ash y skin in black consumers. Black women are known to spend a lot more per capita on hair care than white women, partly due to the widespread practice of hair straightening, which requires products such as relaxers, moisturisers, hair creams, gels and glazes. Research by Procter & Gamble showed that while African-American consumers comprise only 12% of the population, they purchase 30% of all hair care products sold in the US. A growing segment According to a recent report by US-based Packaged Facts, the market for cosmetic products targeting consumers of ethnic origin has continued to perform well s ince the start of the recession, despite minority groups being particularly hard hit, with the US market reaching US$3.0 billion in 2011. According to data from market research company SymphonyIRI Group, ethnic skin care sales through supermarkets, drugstores and mass-market retailers (excluding Wal-Mart) reached US$39.1 million in the year to July 2010. The leading product was ET Browne‟s Palmer‟s Cocoa Butter Formula, with sales of US$27.3 million, followed by products from Ambi (US$4.3 million) and Queen Helene (US$1.4 million).


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While many of the major players in ethnic hair care are now in the hands of the leading beauty companies (L‟Oréal, for example, invested strongly in the category in the late 1990s, acquiring Soft Sheen and Carson, which were later merged), there is still a myriad smaller players. In Brazil, for example, there are over 3,000 small shampoo brands on the market, targeting different hair types. In addition to expanding their ethnic beauty ranges, marketers have s ought to introduce nonethnically positioned brands to new communities through promotional campaigns and spokespeople who appeal to multiple demographics. In the US, popular Mexican-American actress Salma Hayek partnered with CVS Pharmacies to launch a private label hair care, cosmetics and skin care brand, Nuance, in 2011. The last couple of years have seen a plethora of new product launches in the ethnic beauty category, which are more innovative and of higher quality than before. Summary 2 Selected Ethnic Beauty and Personal Care Launches 2010-2012 Sleek Make-Up Be Beautiful Blemish Balm, enriched with red algae extract and peptides; also contains Vitamin C and Vitamin E (UK). Karamel and Brown‟s Karamel and Brown Bronzing For Darker Skin Tones, which was one of the first tanning products aimed at black, Asian and mixed race consumers (US). Specific Beauty, introduced in the US for African American, Latina and Southeast Asian women. Range includes products formulated to be used together, resulting in a more even skin tone and an improved texture. Includes a Daily Gentle Cleanser, Exfoliating Cleansing Cloths, Daily Hydrating Lotion SPF 30, Night Treatment Complex and a Skin Brightening Serum. Cover FX‟s SPF 30 swivel lotion stick, to treat lack of pigment common with the chronic skin disorder, as well as Eye Prep FX, an anti-ageing cosmeceutical primer designed to reduce the appearance of dark circles (US). Johnson & Johnson‟s Ambi Essentials Facial Care Line, introduced exclusively in US drugstore chain Family Dollar stores. Consists of Ambi Essentials Gentle Cleanser and Ambi Essentials Daily Moisturizer with SPF 15. Black Opal‟s Fade Systems, a range of products to treat specific problems. For example, the Maximum Strength Plus System, for fading and skin conditioning, contains the highest concentration level of hydroquinone in a non-prescription formula (US). Face Atelier‟s Ultra Foundation for Women of Color, a silicone-based collection of cosmetic shades for darker skin, comprised of hues that range from a cool caramel to black/brown. Black Opal‟s Mineral Brilliance Natural Color Collection, which is hypoaller genic, oil-free, paraben-free, fragrance-free and talc-free. The Mineral Brilliance Powder Foundation works to camouflage and care for ethnic skin. Foundation is available in Light, Golden Tan, MediumDark, Dark and Very Deep tones (US). Source:


Clothing While fashion among the younger generation has become increasingly universal, with young consumers of all ethnicities tending to dress in a similar way, older consumers often still seek traditional clothing specific to their cultures, and some retailers have begun to cater to this market. In 2009, Wal-Mart-owned supermarket chain Asda in the UK became the first major retailer to launch a clothing range specifically for Asian consumers, in response to substantial demand from customers for authentic cultural clothing at affordable prices. A new 13 piece collection, designed in conjunction with a team in India and made with authentic Indian material, included salwaar kameez (traditional suits), khurtas (tunics), dapata (scarves) and churidar (slim leg


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trousers). A complete suit can be purchased for £26, which is far lower than the price charged by independent retailers. In 2011, Wal-Mart also launched a hugely successful Bollywood inspired collection in Canada.

Outlook More room for growth As ethnic populations continue to rise, due to ongoing migration and higher birth rates among ethnic families, and the purchasing power of certain minority groups continues to grow, multicultural consumers will represent a critical market that manufacturers will continue to target. Marketing to ethnic consumers will nevertheless create a strong challenge to marketers, due to the large diversity of communities, language and cultural barriers, and the differences in attitudes between first generation immigrants and their younger descendents. According to a recent study by NBC Universal, Telemundo and Starcom MediaVest Group, there are five million multicultural “millennial” consumers (ie those aged 21-26) in the US, who are characterised as confident, self-expressive and receptive to new ideas and ways of living. There is still thought to be plenty of growth potential in the market for ethnic beauty, especially as the target market becomes more empowered. This segment will become more mainstream in future, as retailers such as Sephora continue to dedicate more space to them. The future will see further developments that combine cosmetics with skin care products, such as foundations that have active skin treating ingredients (eg hyaluronic acid or serum-based formulas), and more products for men. With today‟s young consumers having grown up eating a much wider range of ethnic foods, and colleges having expanded their international food selections to meet the demands of their foreign students, the future will see further diversification of eating habits, opening up plenty of opportunities for manufacturers and foodservice operators to introduce spicier and more exotic flavoured concepts. Targeted marketing Companies will embrace multicultural societies generally by featuring more diversity in their advertisements. Research shows that ethnic consumers are more likely to notice a brand and talk about it with their communities if advertising is multicultural. Furthermore, markets with a high percentage of certain ethnicities will see more specifically targeted marketing. For example, in the US a number of companies are airing Spanish language TV advertisements, while others are adapting their products to suit the preferences of certain consumer groups. For example, Procter & Gamble introduced two new laundry detergents in Texas and Arizona in bags rather than boxes and in Spanish language, as Hispanic consumers traditionally prefer the bag format.

TREND 5: THE FIGHT AGAINST OBESITY

Trend Outline The problem Despite the growing trend towards health and wellness, the fact remains that obesity rates have reached record levels and continue to rise, albeit at a slower pace than before. According to the World Health Organization (WHO), obesity rates have doubled since 19 80. There were more than 1.4 billion overweight adults aged 20 and above in 2008, while more than 40 million children under the age of five were overweight in 2010.


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Once considered a problem of major developed markets, most developing countries are now seeing a rise in obesity. “Globesity” has become a ter m in common use, demonstrating the global dimensions of the problem. The problem is particularly severe in Latin America. Mexico overtook the US as the leading country for obesity by 2011, affecting 36.9% of the population aged 15 and over. The traditional Mexican diet is unhealthy, being high in carbohydrates, calories and fat. The US ranked second with 35.7%, but growth has slowed significantly in this market and by 2016, the percentage of obese people is expected to increase by only a further 1.9 percentage points. Venezuela and Brazil both also saw a significant increase in their obese populations, to 32.6% and 19.7%, respectively, in 2011. Obesity rates are generally low in Asia Pacific, but several countries in this region are predicted to see among the fastest growth in obesity rates over the forecast period, as rising incomes lead to consumers adopting convenient Western-style diets and fast food concepts. The WHO claims that at least 2.8 million adults die each year as a result of being overweight or obese. There are many health consequences of obesity and excess weight, including heart disease, type-2 diabetes, hypertension and stroke. Obesity and physical inactivity may account for 25-30% of several major cancers: colon, breast, endometrial, kidney and cancer of the oesophagus. Obesity is also a contributing cause of psychological problems that can have an adverse effect on the quality of life and general well-being. The cause Obesity is the result of people consuming more calories than they expend, particularly from energy-dense foods that are high in saturated fats. People are eating more than they did a generation ago, and differently. For example, shortage of time has led to growing demand for convenience foods such as processed foods, snacks, sugary drinks, fast food and takeaways, which are all typically high in saturated fat. Furthermore, while governments are doing their best to educate consumers on healthy eating, food labelling is inconsistent, often confusing and sometimes very misleading. For example, foods that are marketed as healthy, low-fat or fat-free are often high in calories. Several studies suggest that, during the past decade, obesity has increased in areas where per capita food intake has remained the same. The reason is that people are leading more sedentary lifestyles: physical activity has been progressively reduced in Western societies, due to factors such as advanced technology, lack of time and ageing populations. The growing gap between rich and poor is also contributing to obesity, with consumers in the lower income brackets much more likely to be overweight or obese than affluent consumers. Poorer neighbourhoods do not usually facilitate outdoor activities and have limited options for purchasing high quality, healthy food. These consumers often do not have time to keep fit and are most likely to purchase cheap food that is high in calories. The solutions Governments around the world have made efforts to control obesity rates, partly due to the growing burden on healthcare systems. These have included introducing health-related food taxes – dubbed “fat taxes” – on high calorie products. It is not yet clear how much of an effect the use of such taxes have had so far in countries where they have been introduced, such as Australia, Denmark, Finland, France, Hungary and Romania. Experts at the University of Oxford believe that foods would have to be taxed at 20% to provide any measurable future benefit in terms of public health. Widespread negative perceptions and reactions to health-related taxes are evident, where the tax is commonly regarded merely as a revenue-generation exercise by governments in a time of fiscal uncertainty. Denmark‟s new tax on saturated fat was introduced in October 2011, with taxation


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calculated for each food based on its fat content. However, Denmark is currently considering withdrawing the tax, following a media campaign in 2012 which highlighted the political view that food industry jobs could be lost if consumers cross national borders in order to avoid the tax. Romania and Iceland have also removed similar fat taxes. Perhaps a more effective way to prevent further growth in obesity rates is for the government to focus on raising health awareness. Several campaigns are already underway. For example, the UK‟s Change 4 life initiative, which has been in place since 2009, emphasises the importance of movement and activity in combination with increasing consumption of healthy foods, reducing saturated fat content and eating five fruit or vegetables p er day. Its slogan is “eat well, move more, live longer”. In the US, First Lady Michelle Obama‟s “Let‟s Move!” campaign to end childhood obesity was started in 2010. It includes encouraging healthier food in schools, better food labelling and more physical activity for children. In Spain, where one in four children is considered obese, a law was passed in 2012 that bans sales of sweets and fatty food in school canteens. NGOs have also launched a number of initiatives. For example, the Partnership for a Healthier America (PHA) works with the private sector to end childhood obesity. In 2012, Birds Eye became the first retail food company to join the PHA, investing US$6 million over three years to increase children‟s vegetable consumption through child-friendly marketing, using its input to create new vegetable products, and making its products more affordable for parents through a massive coupon programme. Table 4

Obesity Rates by Country 2006/2011/2016

% population aged 15+ Mexico US Venezuela Australia UK Russia South Africa Poland Greece Brazil Argentina Canada Spain Turkey Germany Belgium Denmark Sweden Austria Netherlands France Norway Italy Switzerland Malaysia Thailand South Korea China Japan Indonesia


2006

2011

2016

29.4 34.3 26.0 25.1 24.0 22.0 21.4 18.1 16.4 14.6 15.4 15.7 14.9 14.2 14.2 13.3 11.2 10.1 11.7 11.3 10.4 8.8 10.2 8.9 7.4 5.8 3.7 3.4 3.3 2.5

36.9 35.7 32.6 29.7 26.6 23.4 22.7 20.6 20.2 19.7 18.5 17.7 17.5 17.3 16.2 14.9 14.0 13.3 12.7 11.6 10.9 10.7 10.6 9.7 8.9 7.3 4.4 4.2 3.5 3.2

43.0 37.6 38.9 34.1 28.5 24.6 23.9 22.4 23.2 24.6 21.6 19.0 19.0 18.1 16.9 16.2 15.5 14.7 13.7 13.0 12.0 12.3 11.6 10.8 10.5 9.0 6.6 8.1 3.7 4.0

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India Source: Note:

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2.0

Euromonitor International Those with a BMI of 30kg/sq m or more

Implications Consumers look for a quick fix The main impact of rising obesity has been a desire by consumers to lose weight. Despite consumers‟ expanding waistlines, the pressure to be thin is greater than ever. Young people, in particular, strive to have the ideal body image as portrayed by the media, and in doing so are suffering increasingly from disorders such as anorexia, bulimia or malnutrition. Euromonitor International‟s Annual Survey of online consumers revealed that 36% of all consumer‟s globally claimed to be on a weight loss diet. Among f emales, the percentage was higher, at 41%, and with regard to age, those in the younger age groups – 15-29 and 30-34 – were most likely to be on a diet, at 30% and 41%, respectively. More than three quarters of consumers (77%) considered limited fat consumption to be an important attribute to health. This was highest in Japan, at 85%, which incidentally has the one of the world‟s lowest obesity rates (just 3.5%). However, in Germany only 53% of respondents deemed limited fat consumption to be important. Chart 10

Source:

Chart 11

Source:

Respondents “On a Diet Trying to Lose Weight” by Country 2011


Respondents “On a Diet Trying to Lose Weight” by Age 2011



2.9

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Chart 12

Source:

Importance of “Limited Fat Consumption” by Country 2011


Impact on retail markets As many are or unable or unwilling to lose weight the hard way – ie by reducing food intake and increasing exercise – they turn to easier solutions, such as low-fat/low-calorie foods, OTC diet pills or, in more extreme cases, surgery. This is d riving growth in a number of market segments and providing opportunities for manufacturers to develop new products that help consumers lose weight without having to sacrifice taste and satisfaction. Weight management products as a whole experienced global value growth of 32% between 2006 and 2011 and were expected to remain dynamic over the next five years. Past growth was fuelled partly by the creation of an OTC obes ity category by GlaxoSmithKline, which launched its orlistat-based drug alli in the US in 2006 and across Europe in 2009. However, with the brand‟s allure having worn off, this segment is forecast to remain static in the future. The unpleasant side effects of alli, along with the relatively high price of the drug and publicity surrounding the occurrence of renal failure by some patients taking orlistat – the active ingredient – have deterred many consumers from taking alli. Innovation in flavours and further launches in powders, soups and bars have contributed to healthy growth in retail value sales of meal replacement slimming products. Novel ingredient technology has improved the palatability and texture of these products to make them more appealing to consumers. Weight loss supplements and other slimming products now offer more options in powders and gels. However, the image of these products has been harmed by the fact that some have been found to be tainted with banned prescription drugs or contaminated with toxic ingredients. Products in these two categories have seen increased innovation in terms of delivery formats in powders and gels. The relatively limited side effects of slimming teas and the perception of them as a more natural weight loss alternative helped sales grow by 73% o ver the 2006-2011 period, with much of this dynamism deriving from Asia Pacific.


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In Mexico, which has the highest obesity rate in the world, those seeking to lose weight look to do so through weight management options rather than changing their diets or exercise habits. Many supplements, known as “miracle” products, are advertised aggressively with claims that they can help consumers lose weight. Despite the government prohibiting the advertising of these products in 2011, the category still grew significantly. Sales of BFY foods with reduced fat and sugar have performed well in recent years, with sales of reduced sugar beverages in particular soaring by 40% in value between 2007 and 2012. However, when seeking foods that are low in calories, consumers do not want to sacrifice taste and texture, and the challenge is for manufacturers to develop products that are both lowfat/low-sugar but also filling and tasty. Table 5

Global Sales of Weight Management Products 2006/2011/2016

US$ million 2006

2011

2016

% growth 2006/11

% growth 2011/16

Meal replacement slimming Weight loss supplements Slimming teas Other slimming products OTC obesity

4,815 3,976 581 465 35

6,695 4,481 1,007 485 358

9,025 5,425 1,482 519 359

39.0 12.7 73.4 4.3 937.1

34.8 21.1 47.1 7.1 0.2

TOTAL WEIGHT MANAGEMENT

9,871

13,025

16,809

31.9

29.1

Source:


Table 6

Global Sales of Selected Better-for-you Products 2007/2012/2017

US$ million

Reduced fat Packaged food Reduced sugar beverages Reduced sugar packaged food Source:

2007

2012

2017

% growth 2007/12

% growth 2012/17

76,123 33,299 22,933

93,402 46,665 29,327

115,803 61,792 36,180

22.7 40.1 27.9

24.0 32.4 23.4


Foodservice focuses on calories Restaurants are developing more low-calorie and reduced fat options, and are printing calorie counts on menus in response to demand from weight conscious consumers. Research conducted in the US found that most restaurant diners underestimate the fat and calorie content of food on the menu by about half. When nutritional information was provided on the menu, many diners selected healthier, lower fat and lower calorie items. The internet has a number of sites available that provide nutrition information on items served in popular US restaurant chains. In the US, legislation recently came into effect requiring restaurants operating with 20 or more locations to disclose the number of calories per gramme of saturated fat, weight of trans fat and weight in milligrammes of sodium on menus. McDonald‟s already does this in countries such as the US, Australia and South Korea.


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In the US, Denny‟s recently added “Fit Fare” selections to its breakfast options, such as chicken sausage, egg whites, wheat pancakes and turkey bacon, which offer at least two of four qualifications per serving: fat content of 15g or under, under 550 calories, more than 20g of protein, or more than 8g of fibre. Denny‟s also launched a “Meal Calculator” that allows users to instantly see the calories and fat c ontent of any item on its menus. However, studies show that displaying calories on m enus does little to prevent overeating or consumption of fatty foods. Other, more innovative concepts are being developed to help reduce overeating at restaurants, including Halfsies, which is signing up restaurant partners in the US which are willing to serve customers half as much while charging them the regular price. The restaurant gives the savings from serving less food to Halfsies, which donates 60% of the money to local hunger charities and 40% to global food relief organisations. The idea is to make consumers feel good about both cutting calories and making a charitable donation. Adapting clothing to new body shapes Another consequence of obesity is that body shapes are changing and clothing manufacturers must adapt accordingly. “Vanity sizing”, the practice of labelling clothes with smaller size numbers, has been carried out by clothing manufacturers for some time. Today‟s US size 10 was sold as a size 14 in the 1940s. Nevertheless, there is growing demand for plus size clothing, and many retailers now have special ranges in their stores or specific concepts targeting big consumers. According to NPD Group, at least half of American women now wear plus-size dresses and trousers, and this group controls nearly 30% of the purchasing power for clothes. H&M launched plus-size sections in US stores in February 2012, while The Limited announced plans to open stores by 2013 for a new larger sized line. In the UK, retail consultancy Verdict found that plus-size clothing accounted for around 23% of total womenswear sales in UK in 2011, up from less than 19% in 2006. A report in the UK‟s Daily Mail newspaper in September 2012 reported that plus-size fashion ranges for children as young as three are on the rise. In the US, brands such as the Gap, Forever 21, Old Navy and Target all provide clothing for children who are too big for s tandard children‟s clothing lines, while Sears launched its Pretty Plus collection for girls aged seven to 10 years.

Outlook Obesity rates may finally stabilise In developed markets, obesity levels are expected to level out over the forecast period, as consumers become more aware of healthy lifestyles, and governments, manufacturers and foodservice operators introduce more efforts to help prevent consumers from eating too many fatty and sugary foods and to take more exercise. Technological developments in slimming products and low-fat and low-sugar foods, which will lead to better flavours and a higher satiety factor, will help consumers lose weight. For example, in the US, Sensa Products‟ new SensaTastants, a powder formulated with maltodextrin, tricalcium phosphate, silica and flavourings, which is sprinkled on foods before eating, sends signals of satiety to the brain through olfaction. Also in the US, Nestlé‟s Optifast is a nutritional supplement to help people who suffer from severe medical conditions to lose weight quickly; while Generex Biotechnology‟s Crave-NX 7 Diet Aid is an oral glucose spray that claims to help curb cravings and promote weight loss. Is stevia the answer? When the plant-based sweetener stevia gained regulatory approval by the European Food Safety Authority (EFSA) in November 2011 for use in food and drink production in the EU, it was


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hailed as the key to fighting obesity and opening up a whole new market for sugar-free products at a time of growing distrust of artificial sweeteners and rising demand for natural and calorie reduced products. Following stevia‟s EU approval, several major companies have launched stevia-sweetened soft drinks in Europe, such as PepsiCo‟s SoBe, which had used stevia as an ingredient in the US since 2008, and Unilever‟s Lipton Green Tea with Mango. Coca-Cola Co also launched “mid-calorie” stevia-sweetened versions of Sprite and Fanta in the US in 2012. Nestlé‟s Nestea with Stevia, already available in Austria, was due to be launched in a host of EU countries by the end of 2012. However, there are several threats possibly hindering the long -term success of stevia. Firstly, the bitter aftertaste has been found to put consumers off, especially when used alone as a sugar substitute. To create the best taste profile, the product must be combined with sucrose. In France, poor consumer feedback led dairy giant Danone to reformulate its recipe for its steviasweetened yoghurt brand Taillefine using a different sweetener in 2010. Secondly, the product‟s “natural” positioning has been called into question, since the extraction process for the final product, steviol glycoside, from the crude stevia plant necessitates a complex manufacturing process, including bleaching, desalinating and crystallising. Leading soft drink player Ito En launched Teas‟ Tea Plus H alf & Half in April 2012, which is green tea flavoured with apple, lemon or peach and sweetened with stevia. The product markets the fact that it contains catechins, an antioxidant present in tea which, according to the product, helps to maintain a healthy heart and neutralise free radicals. Opportunities in plus-size clothing However, as weight reduction does not happen overnight and obesity rates are expected to rise, albeit at a slower rate than before, there will continue to be strong and growing demand for products aimed at larger consumers, such as plus-size clothing. Given the stagnation of the clothing market, this will provide a real opportunity for designers and retailers to diversify. According to research company IBISWorld, plus-size sales are set to increase in the US by over 5% a year over the next five years, compared to overall clothing sales growth of less than 3%. The category is expected to reach a value of US$9.7 billion by 2017, up from an estimated US$7.5 billion in 2012. Chart 13

Forecast Growth in Obesity Rates by Country 2011-2016


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Source: Note:

Euromonitor International Those with a BMI of 30kg/Sq m or more

TREND 6: NEW ATTITUDES TO GROWING OLD

Trend Outline Blurring of age boundaries As populations have aged and society become more liberal, attitudes towards youth, middle age and old age have changed markedly. Traditionally perceived boundaries of age -appropriate lifestyles have become blurred. With women having children later and later, some people in their 50s still have young children and teenagers at home, while others are already grandparents. Indeed, while teenage pregnancy is still rife in countries such as the UK, some women over 50 are having their first babies. With parents and children now sharing the same reference points and the internet breaking down age barriers, it is clear that consumer demand is less age-specific than ever before. Postponing old age Studies have shown that the over 50s do not consider themselves old, and many want to learn and work for as long as possible. A survey published by the American retirement communities company Del Webb in 2010 revealed that according to most Boomers, old age begins at around 80. The current 50 year-olds did not yet consider themselves as seniors, while only 56% of boomers turning 64 in 2010 considered themselves as seniors. 80% of both groups


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stated that they felt younger than their age. Reasons given for feeling younger than they were included their mental attitude, happiness and good sense of humour. According to another study, the Wells Fargo Retirement Survey of 2010, 72% of middle class Americans between the ages of 25 and 69 expect to work through their retirement years. Another 2010 study, by MetLife‟s Mature Market Institute (MMI), found that around 65% of people aged 55-64 were still participating in the workforce. According to the report, in the past, around 75% of men and women would have been fully retired within four to five years of their 65th birthday, but by the time the first early boomers approach 70, fewer than half of those aged 65 to 69 will have retired. A survey of more than 1,000 over 50s in the UK, commissioned by educational website Love to Learn in 2012, revealed that the average British person believes they are youthful until the age of 55 and that old age sets in at 69. The survey showed a very positive response to learning later in life. The desire to learn new skills was found to peak in the late 60s, fuelled by a desire to keep pace with a fast-changing world. Computers and the internet, followed by modern history, family history, gardening and digital photography were cited as the most desirable subjects for the over 50s to learn about. Focus on health and wellness One of the main reasons for people staying younger for longer is that they are taking greater care of their health. Regardless of the general rise in obesity rates, today‟s consumers are better educated about fitness and nutrition and are taking preventative measures to preserve their health for as long as possible. Furthermore, advances in medicine mean that healthy life expectancies are increasing all the time as people are living longer with multiple chronic illnesses. In just five years to 2011, healthy life expectancy, ie the age to which a person can expect to live in “full health”, rose by more than two percentage points globally, to almost 62 years. The only country to see a slight decline was France, with especially strong increases witnessed in South Africa (where healthy life expectancy was still lowest, at 50), Brazil (62 to 66) and Sweden (where healthy life expectancy was highest at almost 77). The Del Webb survey of 2010 revealed that both young and older Boomers stay active, are in good health and work out, with 51% of older Boomers reporting that they were as active or more active than they were 15 years previously. Most Boomers also considered themselves to be healthier than their own parents were at their age. As many as 40% of younger Boomers and 45% of older Boomers said they still exercise d aily or several times a week. In Japan, for example, which has both the world‟s fastest ageing society and the longest life expectancy, local governments have been disassembling children‟s playgrounds and converting them into fitness parks for the retired. An increasing number of elderly people are taking part in workout classes in these converted playgrounds, funded by local government. Table 7

Healthy Life Expectancy by Country 2006/2011/2016

Healthy life expectancy at birth Sweden Japan Switzerland Italy Spain Australia Norway Germany


2006

2011

2016

74 75 74 74 74 73 73 73

77 76 75 75 75 74 74 74

78 77 76 75 75 75 75 74

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Canada Greece Netherlands France Denmark Austria South Korea UK Belgium US Poland Mexico China Argentina Venezuela Turkey Brazil Malaysia Thailand Russia Indonesia India South Africa Source: Note:

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73 73 72 74 71 72 70 72 72 70 68 66 65 66 66 63 62 64 61 60 59 55 46

74 73 73 73 73 72 72 72 72 71 68 68 68 67 67 66 66 65 63 62 62 58 50

Euromonitor International Average number of years that a person at birth can expect to live in “full health” by taking into account years lived in less than full health due to disease and/or injury

Internet creates level playing field Digital technology, including the internet, has played a big part in the blurring of age boundaries, as people of all ages communicate freely through blogs and reviews, online forums and social networking sites, and are therefore exposed to the same culture. Non age-specific advertising from the likes of Apple has helped to make gadgets such as smartphones and tablets fashionable for all. Euromonitor International‟s Annual Survey of online consumers in 2011 found that al though internet usage among respondents aged 60 and over was lower than the average for all respondents, it was nevertheless quite substantial. Those in the older age group were almost as likely to visit online news sites a t least once a week, and as likely to use internet banking. Furthermore, as many as 31% of those aged 60+ regularly visit social networking sites. Chart 14

Internet Usage 2011


74 74 74 74 73 73 73 73 73 72 69 69 69 68 68 67 67 66 63 64 64 60 52

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Source:


Implications Opportunities in beauty products and services The desire for Baby Boomers and older Gen Xers to maintain a youthful appearance for as long as possible has opened up opportunities to target older consumers in a range of segments related to hair and skin care, healthcare and fashion. This takes the form of both product segmentation and targeted marketing. According to a recent UK survey by Saga magazine, almost 75% of women over 50 still wear high heels and fashionable clothing. One of the categories that has benefited most from the desire to stay young is that of antiagers, on which women have been prepared to spend their money throughout the recession. Overall, sales of anti-agers soared by 63% in value over the 2006-2011 period, to US$22.2 billion. Beauty companies have responded to this growing demand by launching an array of antiageing products which do not just target wrinkles but a re part of an overall anti-ageing equation, including uneven skin tone, hyperpigmentation, dark spots, dryness, sun damage and expression lines. Multi-functional products which target all the signs of ageing better suit today‟s hectic lifestyles and also provide better value for money, allowing consumers to trade up. Indeed, “Ageless” has become a common marketing buzzword of late for skin care companies, showing the shift from the anti-agers of the past, which were typically just marketed as antiwrinkle treatments, towards more comprehensive products. Sales of premium anti-agers have been fuelled by an increasing number of launches of specialised serums, as well as creams for specific skin care issues. Recent high tech l aunches include Etat Pur, which offers a range of individual doses of active ingredients to be used together with a cream to target a specific skin care issue such as pigmentation, redness or deep wrinkles; YSL‟s Youth Liberator, which uses glycobiology; Lancôme‟s Absolue L‟Extrait, with over two million rose stem cells; and La Prairie‟s Skin Caviar Liquid Lift, which uses a glu cosebased polymer. Furthermore, Clarisonic anti-ageing devices have created a new category within beauty, fuelled by a high-profile media presence and attention from bloggers.


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French company Lancôme launched Visionnaire serum in 2011, an all -in-one serum targeting wrinkles and improving uneven skin tone; while in Germany, Beie rsdorf rolled out a new premium anti-ageing skin care system which promotes stem cell regeneration. The product, La Prairie Cellular Power Infusion, carries a hefty price tag of US$475 and is promoted with the tagline “Never look your age again”. The use of glamorous role models The major cosmetics companies have long used mature celebrities to front their anti-ageing products to appeal to the over 50s, reinforcing the idea that older women can be glamorous too. The actress Jane Fonda, at 72, is still an ambassador for L‟Oréal, promoting its Age Perfect line. Other actresses used by L‟Oréal to front its skin care brands include Diane Keaton, in her 60s, for its Age Re-Perfect, and Andie McDowell, in her 50s, for RevitaLift. Procter & Gamble‟s Cover Girl used 50-something Ellen DeGeneres for its Simply Ageless line; while Procter & Gamble hired the then 54-year old actress Kim Cattrall, star of the TV series “Sex and The City”, to represent its Olay Total Effects 7-in-1 Anti-Aging Body Wash & Body Lotion in early 2011. Similarly, Helena Rubenstein chose youthful looking Demi Moore as the face of its Age Brilliantly campaign. Colourants and hair loss treatments have also benefited from the desire for eternal youth, as consumers seek to cover the tell-tale signs of ageing. Colourants saw sales leap by 38% over the 2006-2011 period, in part due to a rise in at-home hair colouration as a cheaper alternative to expensive salon treatment. Innovation within the category included hair colour “foam” formulations from the likes of Clairol (Procter & Gamble) and John Frieda. Hair loss treatments grew by 57% from a smaller base to reach a value of US$772 million. Table 8

Global Sales of Age-related Beauty Products 2006/2011/2016

US$ million

Anti-agers Colourants Firming/Anti-cellulite body care Hair loss treatments Source:

2006

2011

2016

% growth 2006/11

% growth 2011/16

13,594 9,784 2,033

22,189 13,468 2,604

31,536 17,739 3,268

63.2 37.6 28.1

42.1 31.7 25.5

491

772

946

57.3

22.6


Opportunities in health and wellness The fact that the over-50s are taking more care o f their health and are living to a much older age has been beneficial to the health and wellness industry in recent years. Convenience is also important, and as many consumers often find it hard to eat the appropriate amount of food containing the vitamins and other benefits they seek, it is simpler and easier for them to consume a food or drink containing such elements. Health and wellness products positioned for cardiovascular and digestive health were particularly buoyant over the 2007-2012 period. Globally, sales in these categories surged by 45% and 42% to reach values of US$8.1 billion and US$68.1 billion, respectively, by 2012. The desire by older consumers to maintain a healthy heart and digestive system was no doubt behind this growth. Products for digestive health are typically fortified with probiotics, prebiotics and/or added fibre, while those positioned for cardiovascular health are fortified with plant sterols, omega-3 (sometimes omega-3 and -6), betaglucans and reduced salt food positioned as heart healthy.


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Despite consumers‟ fears about losing their memories as they get older, products positioned for brain health were flat over the period, growing in value by just 1%, to US$486 million. This may be due to competition from omega-3, -6, -9 supplements, sales of which soared by 120% between 2006 and 2011 to reach a value of US$1.3 billion in 2011. With osteoporosis common in post-menopausal women, and joint problems prevalent among older consumers, health and wellness products positioned as beneficial to bone and joint health have achieved steady growth, with sales up 13% over the 2007-2012 period, to US$11.7 billion. These are typically led by products fortified with calcium and/or vitamin D. Japanese women are keen on collagen-infused foods and drinks. In 2010, Shiseido launched its anti-ageing drink The Collagen, claimed to plump out wrinkles in as little as three days. Frutarom of Israel and Copalis of France also collaborated to produce a prototype anti-ageing skin drink called Collative, composed of marine collagen and elastin. Table 9

Global Sales of Age-related Health and Wellness Products 2007/2012/2017

US$ million, current prices

Digestive health Bone and joint health Cardiovascular health Brain health and memory Source:

2007

2012

2017

% growth 2007/12

% growth 2012/17

47,795 10,325 5,603 484

68,050 11,703 8,129 486

94,899 13,327 11,660 592

42.4 13.4 45.1 0.5

39.5 13.9 43.4 21.8


Boom in cosmetic procedures Consumers‟ desire to grow old gracefully, along with technological advancements in cosmetic procedures, has led to a surge in demand for non-surgical cosmetic treatments in recent years. In addition to the greater availability of new types of injectable filler treatments to treat wrinkles, other services such as laser resurfacing, micro current technology (computer-aided cosmetology instruments such as CACI-Ultra) and chemical peels all offer alternatives that are more affordable than facial surgery, with a shorter recovery time. Many providers now market these treatments together as “non-surgical face lifts”. Dermal fillers are no longer the preserve of the very wealthy, and in some countries have become mainstream. In the UK, for example, drugstore chain Superdrug rolled out its in-store Pro Skin clinics in 2012, which offer anti -wrinkle injections, laser hair-removal and microdermabrasion with prices starting at just £149 for Botox or fillers, and chemical peels for £69. There is also significant growth potential in t he Asia Pacific market for facial i njectable products, with doctors increasingly offering such services in their practices, as patients demand less invasive cosmetic procedures. Q-Med‟s Restylane became the first Hyaluronic acid (HA) dermal filler to be approved for aesthetic use in China in January 2009 and the market has grown strongly since then.

Outlook Age will be just a number With many now believing age to be a state of mind, applying the adage “you are only as old as you feel”, it is becoming more difficult for marketers to typ ecast consumers along the lines of age. This is especially true of the fashion market. Women do not wish to be stigmatised and are


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happier shopping in youthful fashion stores that cater to all shapes and sizes than being sent to retailers that specialise in clothes for over-50s. Marketers will in the future find more ways to identify, and to communicate and connect with consumers other than by age segmentation, for example by targeting them on the basis of their attitudes, values and life stage. At the same time, ageing demographics, and in particular changing attitudes towards getting older, will provide opportunities for new product development in a host of categories, from anti-ageing creams and hair dyes to preventative health products and rejuvenating non-invasive surgical procedures. The ongoing quest for eternal youth As populations continue to age, the future will see further strong growth in categories such as anti-agers, hair colourants, hair loss treatments and health and wellness products. Cosmetic surgery will continue to lose its stigma and non-surgical treatments such as facial fillers will become more widespread and reach mass market channels. According to a new report by GlobalData, the global market for facial aesthetics is forecast to enjoy a CAGR of 9% over the next five years to reach a value of US$4 billion by 2017. This growth will be fuelled by minimally invasive and non-invasive procedures that are affordable and offer long-term results. The market will be led by Botulinum toxin, due t o advantages such as better patient comfort, short procedure times and faster results. HA dermal fillers have fewer side effects but last only three to six months. However, collagen injectables long used to treat superficial wrinkles (Zyderm, CosmoDerm) were recently discontinued by Allergan, leaving the way open for the development of other products to serve patients with fine lines around the eyes and mouth. Meanwhile, scientists are working on ways to reverse ageing, and the future may see a breakthrough in the development of products that will slow the biological clock. Researchers are examining anti-ageing on a cellular level. For example, a new drug being investigated by GlaxoSmithKline, resveratrol, which is derived from a compound in red wine, has been found to reproduce the anti-ageing affects of a calorie-restricted diet and could a dd 10 healthy years to a life span. Other research suggests that taking supplements like creatine and ginseng in the 40s could slow the ageing process for both the mind and the body, so those experimenting now may see real results in a decade. The forecast period could also reveal more information on testosterone gel, a topical steroid believed to restore libido and general vigour in ageing men.

TREND 7: EXPERIENCE-BASED CONSUMPTION

Trend Outline Money can make you happy Since the start of the global recession, consumers in developed markets have focused less on conspicuous consumption and the gain of material possessions, and more on s eeking out mood-boosting or even life-changing experiences. This is largely due to the sheer need for escapism that has resulted from a prolonged period of economic austerity, but may also be linked to the status culture that compels consumers to seek kudos by documenting their unique experiences via social media such as Facebook, Twitter or YouTube. New studies of consumption and happiness show that people are happier for longer when they spend money on experiences instead of material objects. Firstly, anticipation increases happiness: planning a holiday in advance gives people something to look forward to all year while carrying out a mundane job. Secondly, a positive experience can provide happy memories for ever more.


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The London 2012 Olympic Games and Paralympics was an excellent example of this. For many, the experience of being part of a once -in-a lifetime event was worth more than a holiday abroad or a new possession. Consumers spent hundreds of pounds on tickets to the opening ceremony or sporting events and came away with rec ollections to treasure for the rest of their lives. Today‟s consumption habits are all about emotional efficiency: how to reap the most happiness for one‟s dollar. Thomas DeLeire, an associate professor of public a ffairs, population, health and economics at the University of Wisconsin in Madison, recently published research examining nine major categories of consumption. He and Ariel Kalil of the University of Chicago discovered that the only category to be positively related to happiness was leisure: vacations, entertainment, sports and equipment like golf clubs and fishing poles. Seeking the feel-good factor Once basic necessities are taken care of, consumers nowadays are prepared to forego the purchase of luxury items in favour of experiencing the feel-good factor associated with being with loved ones or undertaking a new or relaxing activity. For many – especially those on restricted incomes – the experience of spending more time with the family is enough. Many have opting to use their extra cash for ni ghts at home, watching movies and playing games, or taking “staycations”. Others are prepared to spend their money on any manner of paid-for pursuits, ranging from relaxing outings, such as concerts or theatre, spa sessions, theme parks or weekend city breaks, to more extreme activities, such as scuba diving or mountain climbing, or educational challenges such as language lessons, art classes or cookery lessons. Euromonitor International‟s Annual Survey of online consumers revealed that the majority of respondents in all markets did not intend to reduce their spending in 2012 on activities such as restaurants, cinemas or holidays. Most consumers stated that their expenditure on such activities would either remain the same or increase over the next year. Emerging market consumers find new ways to spend wealth The trend towards experience hunting has so far been less pronounced in emerging markets, where many consumers are only beginning to reap the benefits of economic development, and are eager to buy things that their parents could only dream of. Most of China‟s burgeoning middle class grew up during a period when standards of living were much lower, so striving for material betterment comes naturally to them. According to a survey conducted by McKinsey Shanghai, urban women in China spent 63% of their incomes on consumer goods during 2009, up from just 30% in 2006. Clothing was the largest category of expenditure, followed by cosmetics, health, travel and consumer electronics. However, at the same time, increased income and leisure times, combined with new-found freedom to travel, have led rich consumers in developing markets such as China, Russia and Brazil to begin looking for new, life-enhancing experiences. Many Chinese tourists are combining the pleasure of buying consumer goods with the experience of travelling abroad, by travelling to shopping destinations such as Tokyo, London, Paris and N ew York. Others are travelling to destinations in Asia, Europe or the Americas for the cultural experiences they offer. A 2012 study by Hotels.com, the Chinese International Travel Monitor (CITM), which questioned hotel owners globally about the habits of Chinese tourists, found that their profile is changing. Chinese people are increasingly travelling independently (although group travel stil l remains slightly more popular), and feedback suggested that Chinese travellers are becoming younger, more confident, savvier online and more familiar with foreign cultures and customs. Chinese travellers are known to enjoy purchasing high-end items from the world‟s luxury retailers, but they are also seeking to expand their travel experiences through exposure to


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different cultures and visiting places of outstanding natural beauty. The Hotels.com Hotel Price Index f ound that the Chinese were among the world‟s largest spenders on accommodation when travelling abroad, spending on average US$169 per night in 2011. The Japanese spent the most, at US$190 per night. Chart 15

Source:

Intentions Regarding Spending Habits by Country 2011


Implications Arrivals continue to rise The desire to escape the daily grind and seek out relaxation or new experiences has probably had the largest impact on the tourism industry. Despite the l ast couple of years being tough for the travel industry, with disruptions caused by weather, politics, the European debt crisis and financial stagnation in the US economy, the number of global in ternational arrivals increased by 6% in 2010 and a further 4% in 2011, exceeding the one billion mark for the first time in the latter year. Furthermore, growth is expected to remain buoyant in the future, at 3-4% annually over the forecast period, to reach 1.2 billion by 2016. Chart 16

Global Arrivals 2006/2011/2016


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Source:


Developing markets drive outbound tourism Outbound tourism growth over the past five years has largely been driven by emerging markets such as China and Russia, where the number of departures increased by 56% (to 39.2 million trips) and 51% (to 40.8 million trips), respectively, b etween 2006 and 2011. Strong economic growth, giving rise to a growing middle class and an increase in the number of luxury consumers, has led to a desire among the Chinese to spread their wings and explore other countries. This has been made easier as a result of more relaxed travel visa regulations. For example, in 2011, Japan relaxed its visa requirements following the country‟s earthquake and nuclear disaster. Spain followed in May 2012, after seeing a substantial rise in the number of tourists from China. Some developed markets also experienced strong outbound tourism, such as Canada, Spain and Australia. In these markets, departures rose by 36%, 37% and 59%, respectively, over the 2006-2011 period. Germany and the US remained the top two outbound markets, but departures from the former rose by just 1% over the review period, while the US saw a 5% decline in the number of outbound trips. However, according to a recent TripAdvisor poll, Americans were planning to increase their travel in 2012. According to the study, 79% of respondents planned to spend a minimum of US$3,000 on leisure travel in 2012, 57% intended to pay at least US$5,000 and 21% said they would pay US$10,000 or more. 90% of respondents planned to take two or more leisure trips in 2012, and 24% planned five or more trips. Japanese discover the pleasures of budget flying Although outbound travel from Japan fell by 6% over the review period, this is set to change as the country‟s tourism industry received a major boost from the arrival of thr ee new low-cost carriers in 2012 – AirAsia Japan, Peach Aviation and Jetstar Japan. With flight prices suddenly plunging to about half their former level, Japanese consumers are able to fly away for weekends, visits to friends or even day drips to places like Disneyland. These developments have been made possible through the expansion of Tokyo‟s Haneda and Narita airports. During Japan‟s Obon holidays in August 2012, domestic flights for Peach, AirAsia and JetStar were


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reportedly 94%, 91% and 89% full. AirAsia Japan flies to Sapporo, Fukuoka and Okinawa in Japan, and plans to start flights to South Korea, the Philippines and Guam in the near future. Experiential travel Although consumers appear to be travelling as much as ever, they are more cautious with regard to their expenditure, seeking out the maximum value from their travel experiences and favouring value, simplicity and authenticity over luxury. The vast amount of information available on the internet, both from travel experts and individual travellers, is helping them to achieve this. Analysts report that the US travel industry has seen a continued shift towards soft adventure and exotic travel packages, as consumers seek thrills and “authentic” experiences without being subjected to any real danger or discomfort, and with all mod cons within reach. Niche areas that have benefited from the trend towards experiential travel include holistic and spiritual packages, educational trips and historical and themed tours accompanied by experts. Examples of the latter include the American Queen steam boat on the Mississippi, which was relaunched in 2012, with trips offering 19th-century decor and a history of the river combined with modern amenities such as a swimming pool, comfortable beds and flat screen TVs. In Australia, a whole town has positioned itself as a destination for vintage glamour. From old-style bars and cafés to cut-throat barbers, vintage clothes shops and burlesque shows, the town is offering the whole 1950s experience. A “Vintage Outing” tour involves driving round in old Fiats visiting vintage boutiques and other venues, with hostesses in character clothing. The search for more exotic destinations Driven by a desire for novelty and authenticity, travellers are seeking out more unusual destinations that were previously off the radar. Euromonitor International‟s database shows that the number of arrivals to destinations including Haiti, Angola, Bangladesh, Albania, Sudan, Georgia, Mozambique and Uzbekistan all more than doubled over the 2006-2011 period. Chart 17

Growth in Arrivals: Top 20 Countries 2006/2011


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Source: Note:

Euromonitor International Includes destinations registering arrivals of more than 300,000 in 2011

Daily deal sites fuel demand for experiences A whole range of foodservice and leisure companies are also benefiting from from the move towards experienced based consumption, especially with group buying websites such as Groupon and TravelZoo clamouring to offer exciting deals to their subscribers. Daily offer s ites promote deals for items as diverse as restaurant meals, holidays, sporting experiences such as skydiving and scuba diving, dance classes, movie and museum passes, spa sessions, cookery courses and photography sittings. Subscribers feeling the need to escape from their humdrum lives or who are looking for novel gifts for friends or family are attracted by these offers and often book deals on impulse. A survey by PriceGrabber carried out in the US in early 2012 found that 46% of respondents planned to use daily deal sites, such as Groupon, Living Social or PriceGrabber, more often in 2012 than in 2011. When asked to select all of the categories they will search the most, 53% said food and dining, 46% said shopping, 42% said entertainment and events, and 34% said family and children. All in the service Retailers, foodservice operators and manufacturers are increasingly feeling the need to incorporate experience into their marketing strategies, as consumers seek a dimension of experience in every aspect of consumption. This helps to create an emotional attachment to brands, thus motivating future purchases. Retailers must compete increasingly with online shopping sites, which offer a wealth of information but no real experience. Retailers are waking up to the fact that customers must be made to feel special, in order to make their trip to the shop worthwhile and encourage repeat business and positive word of mouth. This includes giving them access to exclusive events and more personal customer service. For example, the US electrical retailer Best Buy o ffers the services of its Geek Squad, which promises to help shoppers with installing and maintaining their purchases. Other retailers focus on giving customers a whole new experience, making shopping a fun day out. IKEA is a notable example of this. With its Scandinavian design and Swedish food restaurants and food stores, many consumers all over the world are attracted to the stores for their novelty and many make a visit a family day out. In 2010, IKEA announced plans to more than double its outlets in China, where it has been hugely successful, by 2015 as rising incomes turn more visitors and diners at in-store restaurants into furniture buyers. Restaurants make customers more welcome Restaurants and coffee shops represent other categories that are all about experience. Consumers are willing to pay up to 10 times more for a cup of coffee at a ca fé than one that is brewed at home, not only for reasons of convenience but also for the experience they provide. Since the start of the recession, restaurants and coffee shops h ave made a greater effort to enhance the consumer experience and emphasise their authenticity, as consumers look for comfort, familiarity and value. One of the ways they have done this is to foster a homely image, creating a cosy and comfortable atmosphere while offering mod cons such as Wi-Fi access. Starbucks introduced a more personal experience in 2012 by having staff wear name badges and call customers by their first names, which they write on the side of their cups when ordering. Similarly, US diner chain Denny‟s has introduced the tagline “America‟s Diner is Always Open” and launched its Tour of America menu in 2012, which features traditional regional dishes from across the country. Fast food chain Burger King has also tried to achieve a nostalgic effect by filling its restaurants with retro images that aim to conjure a 1950s American diner experience.


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A BBC article of February 2012 described the way in which India‟s new coffee culture has has changed the way young Indians socialise. Coffee shops have provided an acceptable and safe outlet for young people to share a drink with friends or to date, with some branches even providing guitars for jam sessions. The first Cafe Coffee Day (CCD) outlet opened in 1996, and the chain is now opening a branch almost every week and has more than 1,200 stores across India. It has been joined by other chains, including Barista Lavazza and Costa Coffee, while Starbucks announced that it would open its first outlet in India by the end of 2012.

Outlook Quality of life will be paramount With economic growth – growth – especially in the major economies – economies – struggling to get off the ground and prospects for the next five years remaining uncertain, the current mindset is not expected to change a great deal over the 2011-2016 period. Gone are the da ys of of “bling” and conspicuous consumption: a growing number of consumers will sacrifice income and c onsumption for quality for life and experiences that enrich their lives, rather than goods and services that merely make them more comfortable. This bodes well for the tourism industry, which will continue to seek new ways to offer consumers diverse experiences at affordable prices, both at home and abroad. In 2012, the UK government launched its “holidays at home are great” campaign, which it hoped would create 5.3 million extra short overnight breaks and generate £480 million in extra spending over the next three years. Discounts were to be offered by c ompanies across the UK to encourage consumers to make the most of scenic locations, s uch as the Lake District National N ational Park or the Cotswolds. Make way for the Chinese As Asian consumers, in particular, become richer and more sophisticated, demand demand will grow for more specialised travel experiences, such as heritage and culture, “edutainment” theme parks, soft adventure, luxury holidays and sports tourism. The Chinese outbound tourism market is still in its infancy and its future growth is expected to have a massive global impact. Euromonitor International data show that while most Chinese tourists stayed within Asia during the review period – period – Hong Kong and Macau being the most popular destinations, visits to the US more than trebled between 2006 and 2011, to 989,000 trips. Australia also became a more popular destination for Chinese tourists, with the number more than doubling over the period to reach 557,000 in 2011. Visitors to France increased by 60% to 316,000. Chinese tourists are also becoming more adventurous within Asia, with visits to exotic destinations such as Cambodia soaring by 95% to 255,000. South Korea became the fourth most visited destination for Chinese tourists over the review period, with trips increasing by 138% to 2.1 million in 2011, while India is emerging as a destination for the Chinese. As a result of these trends, and in the face of stagnant demand from developed markets, markets, tourism attractions, transport operators and hotels all over the world are going out of their way to court Chinese customers with tailored services. When Hotels.com‟s CITM study asked hotels globally about how they are preparing prepa ring to welcome Chinese guests, two thirds of European hoteliers were planning to add Chinese breakfasts, 58% were planning to employ Mandarin speaking staff and 68% intended to introduce Mandarin translated travel guides. In the US, 52% of hoteliers plann ed to add Chinese teas; and 71% intended to partner with China UnionPay. 57% of hoteliers in Europe were planning to translate the hotel‟s website into Chinese, while 46% of hotels in the US already offer a Mandarin version of their website.


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Table 10

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Departures from China 2006/2011

„000 trips Hong Kong Macau Taiwan South Korea Malaysia Thailand Singapore Japan US Vietnam Australia Myanmar France Germany Cambodia Austria Philippines India UK New Zealand Source:

2006

2011

% growth

8,440 6,371 251 866 443 949 697 793 321 524 249 134 197 252 131 256 134 62 99 68

13,252 7,364 2,205 2,058 1,220 1,192 1,092 1,063 989 956 557 456 316 300 255 245 211 122 117 117

57.0 15.6 779.4 137.7 175.6 25.6 56.8 34.0 208.6 82.4 123.5 241.3 60.1 19.3 95.1 -4.6 57.8 95.0 17.3 72.6


Leisure outlets set for growth Other areas that are likely to benefit from t he trend towards experience-based consumption include spas, theme parks and specialist coffee shops. Euromonitor International data show that these are expected to experience the strongest growth in developing markets, such as China, India and the markets of Latin America. Chart 18

Top 10 Growth Markets for Spas 2011/2016


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Chart 19

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Chart 20


Top 10 Growth Markets for Theme Parks 2011/2016


Top 10 Growth Markets for Specialist Coffee Shops 2011/2016


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TREND 8: THE RISE IN SOCIAL RESPONSIBILITY

Trend Outline Consumers show more compassion Despite consumers having become more value-conscious since the start of the recession, there are also signs that they are, on the whole, becoming more compassionate and socially responsible. Consumers have become more vocal in supporting brands that do good, and are boycotting or publicly berating those they believe to be irresponsible. Furthermore, many are prepared to pay more for products that are more ethically produced, more sustainable or come with the promise of a charitable donation. At the same time, consumers have grown increasingly wary of “greenwashing,” whereby brands artificially inflate their environmental or social credentials. The rise in social consciousness is largely a result of the increasing amount of information about social, environmental and animal welfare issues that is made available to consumers via the media, thanks to lobbying by NGOs – often with the help of celebrities. This has been made much easier in recent years due to the global rise in internet usage and the growth in social networking. Growing interest in ethical issues Euromonitor International‟s Annual Survey of online consumers across eight countries revealed the extent to which ethical issues matter to today‟s consumers. Just over half of respondents globally considered the factors “fair -trade”, “green/environmentally-friendly” and “sustainably produced” to be important when considering a purchase, while “supports local communities” mattered to 47% of respondents. Online consumers in the developing markets of Brazil, China and India appear to be most concerned about a product‟s environmental and ethical credentials, despite the generally weak track record of these nations when it comes to en vironmental issues, and despite the fact that


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many shoppers are still unable to afford the premium imposed on green products and services. In China and India, for example, 81% and 76% of respondents, respectively, considered the “green/environmentally friendly” descriptor to be important. Although respondents in these markets were more affluent than the general population, the results are nevertheless indicative of a fledgling green movement in these markets, as environmental and ethical concerns are increasingly reflected in the business plans of multinationals. Ethical consumerism is still a fairly new concept in Japan, and considerably fewer respondents in this market considered the factors to be important. “Fair trade”, for example, mattered to just 19% of Japanese respondents, although the market for Fairtrade products grew by 54% in US dollar terms to US$27.7 million in 2011, according to Fairtrade Labelling Organizations International (FLO). Sustainability issues have come to the fore in recent years, due to concerns that growing the crops necessary to feed farmed animals requires vast supplies of water and land, while fish stocks are being depleted due to overfishing. Disasters such as the 2010 BP oil spill in the Gulf of Mexico and the Japanese nuclear catastrophe of 2011 have fuelled consumer concerns about traceability and sustainability in the seafood and fish market. In the US, several large retailers have introduced sustainability ratings. Chart 21

Source:

Importance of Green/Ethical Descriptors When Considering a Purchase, by Country 2011


Consumers willing to pay the price When it comes to whether consumers are willing to pay a premium for ethical products, again a surprisingly high percentage of online respondents in Euromonitor International‟s Annual Survey replied positively. Globally, 47% and 46% of respondents agreed that they would pay more for “locally sourced” and “free range” products, respectively, while 43% would pay more for a “fair -trade” product. Demand for locally-sourced products has increased partly due growing concerns about “food miles”, as environmentalists bemoan the negative environmental and socioeconomic impacts of


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increasing transport of food, and partly because consumers feel loyalty to local producers and are keen to put money back into their l ocal economies. As a result of media coverage and exposure of “cruel” factory farming practices, animal welfare issues have become important to a greater number of consumers. Some respond by turning vegan/vegetarian, while others look for “cruelty-free” food options, such as free range meat and eggs. Interestingly, as many as 70% of Chinese respondents said they would pay more for a “free range” product, despite the free range concept being relatively unknown in China. This may be related to the fact that animal welfare issues have been a matter of debat e in China recently, with activists highlighting the high level of animal abuse, from cruel farming methods to the use of circus animals for tricks. Despite FLO not yet operating in the emerging markets of Brazil, China and India, respondents in these markets revealed themselves as most willing to pay a premium for fairtrade products. This suggests that there may be significant potential for fair-trade organisations to develop business in these countries. Among developed markets, as many as 46% of UK respondents were willing to pay extra for “fair -trade”, tying in with the fact that the UK has the largest market in the world for Fairtrade products. From a production perspective, some ethically-minded shoppers seek products with a low carbon footprint. Food whose production involves low energy consumption and/or which uses recyclable packaging is favourably regarded, and more green consumers are factoring in the environmental pollution cost derived from food manufacturing activities in their purchase decisions. However, most consumers still find the concept of carbon labelling confusing. There are currently several different schemes operating, including the UK‟s The Carbon Trust, but at present there is not global standard for carbon footprinting. As a result, only 35% of respondents worldwide said they would pay more for a carbon neutral product. Chart 22

Source:

Willingness to Pay More for Ethical Products, by Type and by Country 2011



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Companies step up CSR efforts Companies have responded to this new-found consumer conscience by spending more money than ever on convincing customers of their corporate social responsibility (CSR) initiatives. Studies have found that successful campaigns must demonstrate return for business, brand and society. Corporate Responsibility magazine recently reported that 72% of companies had formal CSR programmes in 2012, up from 62% in 2010. According to a 2012 survey by Cone Communications, 84% of US consumers believe companies are not just responsible for doing the right things, but also for effectively communicating them to shoppers. 86% said they are more likely to trust companies that report their CSR efforts. 82% said they would favour a company that “clearly demonstrates” its CSR values over one that does not, and 40% said i f they cannot find out about a company‟s CSR efforts, they will not buy the brand. Cause marketing gains popularity Cause marketing has become an integral part of the marketing campaigns of many companies. Cause marketing differs from corporate giving (philanthropy), which generally consists of a specific tax deductable donation, in that it usually involves partnering with a nonprofit organisation for mutual benefit. For example, in the US, Swiss chocolatier Lindt partnered with Autism Speaks in 2012 to raise awareness of, and funds for autism during the Easter season. Lindt pledged to donate 10 cents to Autism Speaks for every Lindt Gold Bunny purchased in the US, up to US$100,000. Some companies even found their own charities. For example, UK retailer Tesco has pledged to donate 15p from each sale of a Halo branded feminine hygiene product to a recently set up Halo Initiative charity, which raises money for women‟s health charities. A global online study of 28,000 consumers in 56 countries, conducted by Nielsen in 2011 to determine the effectiveness of cause marketing, found that as many as 46% of global online consumers were willing to pay more for goods and services from companies that are giving back. Consumers in Asia Pacific were more likely to be “socially conscious consumers”, as were those in the younger age group (63% of the group was younger than 40). With regard to the causes that were most important to this segment, the top three of 18 causes were environmental sustainability (66%), improvements to science, technology, engineering and maths education (56%) and elimination of extreme poverty and hunger (53%). US-based digital cause-marketing start-up Carrotmob uses crowdsourcing techniques to promote brands and causes. The company uses social media to organise groups of people (“mobs”) to buy products within a set period of time if the marketer or store agrees t o invest in a social responsibility project the mob supports. Carrotmob and its clients track members‟ interests and behaviour patterns via Facebook in order to target social campaigns at the members most interested in that particular social cause and to involve them in formulating the campaign. The hope is that those members will then reach out to their friends to help support the campaign. Unilever signed with Carrotmob in 2012, which began with a test campaign at a Fresh & Easy store. More than 250 Carrotmobbers turned up to shop in exchange for the retailer agreeing to install five non-ozone depleting freezers. Unilever promised a donation to the Arbor Day Foundation if mobbers bought at least three Unilever products, including Ben & Jerry‟s ice cream, Ragu sauce and Skippy peanut butter.

Implications The growth of fair-trade The rise in social responsibility has had a significant impact on the retail market for a range of products and services, from fresh produce and packaged foods to clothing and tour ism. One of


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the main categories to have benefited is fair-trade products. Many shoppers concerned about poor living and working conditions in third world countries are prepared to pay a premium for products that ensure a “fair price” is paid to producers a nd funding initiatives are set up to support local community development and enrichment. Leading fair-trade products include coffee, cocoa, bananas, sugar, tea, flowers and clothing. According to FLO, sales of certified Fairtrade products continued to grow in all countries during the recession, although growth slowed in the face of more challenging economic conditions. The fair-trade category benefited in particular from the Fairtrade sourcing commitments of global consumer brands, such as Cadbury Dairy Milk and Green & Black‟s, Nestlé‟s KitKat and Ben & Jerry‟s. FLO estimates that out-of-home and retail sales of Fairtrade products amounted to a record US$7.0 billion in 2011, up by a substantial 3 0% on the 2010 figure of US$5.4 billion. The UK and US are by far the largest markets in the world for Fairtrade products, with sales in these markets reaching US$2.1 billion and US$1.5 billion, respectively, in 2011. In response to public demand, several more brands in the UK moved to Fairtrade in 2010 and 2011, including Cadbury Dairy Milk, Nestlé‟s KitKat, Sainsbury‟s tea, coffee and s ugar, Morrison‟s roast and ground coffee, Tesco Finest Tea and Tate & Lyle retail su gar; while Ben & Jerry‟s made every ingredient it uses Fairtrade and Green & Black‟s converted its entire range of chocolate bars and beverages in the UK to 100% Fairtrade. The Co-operative supermarket pledged to convert all possible commodities to Fairtrade by 2013, while clothing retailers Topshop and Marks & Spencer launched new Fairtrade cotton ranges and discounter Aldi launched its first Fairtrade product range, including bananas, coffee, tea and chocolate. In 2011, Fair Trade USA (formerly Transfair USA) made a decision to withdraw from FLO and to extend the scope of Fair Trade to include plantati ons and factories, but new countries continue to join FLO. In 2011, South Korea registered Fairtrade sales for the first time, amounting to US$24.3 million. Germany also has a substantial and growing market for Fairtrade products, worth US$572 million in 2011. It is estimated that over 30,000 German supermarkets, organic shops and “world shops” in Germany stock around 1,000 different Fairtrade products. The first Fairtrade Towns title was awarded to the city of Saarbrücken in April 2009, many more towns, municipalities and counties have since been awarded this title. Fairtrade certification is not yet used in developing markets l ike China and India. However, according to a 2010 report by Forbesindia.com, some small fair-trade organisations have made inroads into the domestic fair-trade market in India. Shop for Change, a marketing and labelling organisation for domestic fair-trade products, markets a range of fair-traded cl othes in India, in conjunction with designer Anita Dongre‟s AND label. The collection was promoted with an advertising campaign that featured fair-trade cotton farmers along with former Miss India Gul Panag. Table 11

Fairtrade Sales in Leading Countries 2010-2011

US$ million UK US Germany France Switzerland Canada Ireland Australia and New Zealand


2010

2011

% growth

1,680.0 1,171.3 425.0 379.1 274.9 243.6 172.5 157.4

2,140.3 1,472.4 572.1 450.6 378.3 285.4 227.0 214.7

27.4 25.7 34.6 18.8 37.6 17.2 31.6 36.4

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Netherlands Sweden WORLD Source:

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148.8 135.6 5,398.8

210.4 191.9 7,023.4

Euromonitor International from FLO (converted from euro)

Consumers demand locally-sourced products The topic of food miles has been a major issue among environmentalists in recent years, with many concerned about the negative environmental and socioeconomic impacts of increasing transport of food. Food miles are the distances travelled by foodstuffs from farm gate t o consumer. These have increased dramatically, due to the need for retailers to ensure out of season supply and to enable them to source products more cheaply from abroad. Furthermore, food may be transported many miles to be packaged at a central depot and then sent many miles back to be sold near where it was produced in the first place. Many consumers feel loyalty to local producers, and are keen to put money back into their local economies. One way they are able to do this, as well as buy products that they perceive as healthier than those on the supermarket shelves, is to visit farmers‟ markets. While in France and the countries of Southern Europe, outdoor or covered markets selling local produce are part of tradition and nothing new, in countries such as the UK and US, farmers‟ markets are a relatively recent phenomenon that have made a comeback as a result of consumer demand for traceable and wholesome foods that have not travelled across the world. Advocates of farmers‟ markets claim that local produce is more tasty, healthy and cheaper than supermarket-bought produce. In the UK, Sustain claims that the CO2 emissions associated with distribution are 650 times lower when food was bought locally from a farmers‟ market than the same products air-freighted to reach UK supermarket shelves from overseas. Local farmers‟ markets have experienced something of a revival in the UK in recent years, and there are now believed to be around 700 regular farmers markets operating throughout the country. Restaurateurs and retailers are stepping up their commitment to local producers, in order to differentiate their offer, emphasise their quality positioning and show support for the community. In the UK, Tesco‟s Local Choice milk pays local farmers a higher rate than that which is paid to standard milk suppliers. Tesco states on its website that it now stocks some 3,000 local lines, and aimed to increase sales of local products to £1 billion by 2011. Free range foods go mainstream Pressure from consumers, animal rights groups and in some cases celebrity chefs has already made a big impact on animal welfare issues. In the UK, retailers have been forced to orient their supply chains towards more animal-friendly sourcing, while in several countries governments have introduced legislation to protect livestock. The EU‟s Welfare of Laying Hens Directive, which came into force on 1 January 2012, bans eggs from hens in barren battery cages throughout the EU. The move is significant, as of the 400 million or so egg-laying hens in the EU, as many as three quarters were confined to b attery cages. In the UK, TV chefs Jamie Oliver and Hugh Fearnley-Whittingstall launched public campaigns about the way battery-farmed chickens are treated, with the aim of getting supermarkets and consumers to “buy British” and pay a fair price for “ethically reared” chickens and eggs. The campaign proved successful, and retailers such as Morrisons, Sainsbury, Waitrose and Marks & Spencer stated their intentions to remove battery-farmed eggs from their shelves. In 2010, Sainsbury‟s reported that it sold 62% of all Freedom Food labelled products in the UK, with a total value of £143 million over the past year. Freedom Food is a high animal welfare certification endorsed by the RSPCA, which can apply to fresh meat, eggs and dairy products. Sainsbury‟s sales figures showed that Freedom Food labelled items had doubled their sales


41.5 41.5 30.1

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over the past year, led by fresh chicken. Furthermore, figures published in March 2010 by Compassion in World Farming showed that sales of higher welfare fresh chicken meat had increased by 22% over the previous 12 months, while those of standard chicken had remained static. German consumers are also generally highly concerned about animal welfare. Vegetarianism is common, and studies have shown that German vegetarians choose the diet because of a concern for animal cruelty. Germany was one of the first countries to ban battery hens in 2010, ahead of EU legislation. In the US, claims and labelling pertaining to the use of “free range” are unregulated. Free range chicken eggs have no legal definition, and free range egg producers have no common standard on what the term means. USDA regulations on free range meat only apply to poultry. Nevertheless, awareness of animal welfare issues is growing, and manufacturers and retailers are looking at ways to differentiate their products by focusing on humane rearing methods. Due to the lack of an official definition with regard to “free range”, the term is mainly used for marketing purposes. Some use terms such as “pastured poultry” (ie chickens that have been raised on grass pasture for all of their lives); or “naturally raised” (ie, raised in a humane way, fed vegetarian diets and not given hormones). In February 2011, Whole Foods Market announced its new five-step Animal Welfare Rating system. The colour-coded labelling programme was developed by the Global Animal Partnership and establishes baselines for all meats sold in the stores. For instance, the highest rating (5+, coloured green) would go to a chicken that, among other things, had been bred, hatched and raised on a single farm, lived year-round on pasture covered with at least 75% vegetation and had legs that could support itself by the time it reached market weight. According to the company, all fresh beef, pork, and chicken were to be rated according to the five -step Animal Welfare Rating standards by May 2011. Animal welfare is not high on the agenda in Japan, and it is still rare to find free range (“hanashi-gai”) products in mainstream supermarkets, although some natural product stores sell products such as free range eggs. The price of free range products tends to be prohibitively high, so products tend to be restricted to high-end restaurants. The concept of free range foods is also not well known in emerging markets such as China and India. However, China is under international pressure to implement its draft China Animal Protection law, published in September 2009. Activists have highlighted the high level of animal abuse in the country, from cruel farming methods to the use of animals for entertainment. In India, most consumers are vegetarian and those who do eat meat e xpect animals to have been reared in the open. Indeed, an estimated 95% of chicken meat consumed in India comes from chickens bought live by consumers, and just 5% from slaughtered meat. Beef and pork are not consumed in India for religious reasons. Eco-tourism: luxury without guilt The eco-tourism industry has benefited from a desire by consumers to reconcile their demand for adventure and exoticism with their concern for the environment. This type of tourism allows consumers to spend their money to benefit or preserve environmental sites or wildlife. The WTM 2011 Global Trends Report suggests that Europeans are seeking “luxury without guilt” – leisure experiences that revolve around authenticity and ethical, responsible luxury experiences. Hotels have responded to these trends by offering green initiatives, while destinations and travel companies have targeted European holidaymakers with packages offering sustainability, best practices, and help for local communities.

Outlook


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Consumers will seek “three-dimensional” brands As consumers become more compassionate and aware of ethical issues – especially in emerging markets where incomes are rising – they will become more socially responsible with regard to their shopping habits. The internet, and in particular social networking, will continue to make it easier for NGOs and grassroots groups to spread environmental messages, and these organisations will continue to enlist the help of influential and ethically-minded celebrities to help change consumers‟ and retailers‟ buying behaviour. Wider availability, falling prices and media attention will be key factors in boosting awareness and further driving consumer acceptance and uptake of fair-trade products, free range foods, local produce and eco-friendly products; while cause marketing will continue to be used as an integral marketing tool for brands wishing to form an emotional connection with consumers. The most successful companies in future will be those that can make ethical improvements to their manufacturing processes or end products, while minimising the sacrifices that consumers must make in order to buy and use them. Consumers of the future will favour “three dimensional” brands that show social and ethical responsibility, as long as these also balance quality and value. Opportunities in emerging markets As yet, ethical consumerism is underdeveloped in emerging and developing markets. However, companies in these countries will be fo rced to change their practices for the better in order to remain competitive with the West and meet international environmental targets. Awareness is growing, and change, though gradual, will come through education and income growth. FLO has already recognised the potential for ethical consumerism among the more affluent emerging market consumers, and is looking to develop the domestic markets for fairtrade in countries that traditionally are only exporters of fair -trade goods, such as India. The “buying local” movement is also expected to gain momentum in the future, as consumers are increasingly concerned about food miles and supporting local farmers. This could lead to the further growth of farmers‟ markets and encourage retailers to source locally. In the US, Wal -Mart announced plans in 2010 to double its sales o f locally grown produce by the end of 2015 , while the burrito chain Chipotle reported in July 2011 that it would double the amount of locally-grown produce (within 350 miles of the restaurant in which it is served) in its 1,100 outlets, including romaine lettuce, red onions, green peppers, jalapeno peppers and oregano. In the UK, Asda, which already stocks some 6,000 locally sourced products, unveiled further ambitious targets to generate £500 million a year in sales from local and ethnic suppliers by 2013. Animal welfare concerns drive free range growth The forecast period is likely to see an increase in demand for free range eggs and meat, as consumers become increasingly aware of animal welfare issues and more demanding of high quality foods. However, with the world‟s ever growing population, burgeoning meat demand from developing markets such as China and rising prices, there will be limited demand for such products, with the majority of meat demand continuing to be met by intensive farming methods. Conditions for animals reared for meat are likely to continue to see improvements as a result of public pressure. For example, the EU‟s Welfare of Laying Hens Directive, which came into force on 1 January 2012, bans eggs from hens in barren battery cages throughout the EU, but animal rights groups such as Compassion in World Farming, the Humane Society of the United States, the World Society for the Protection of Animals and the RSPCA (Royal Society for the Prevention of Cruelty to Animals), continue to call for an outright ban on caged hen production. In 2011, it was reported that sales of free range eggs had leapt by 90% within a year in Canberra, Australia since the introduction of new labelling laws in the ACT region that require retailers to display signs telling shoppers whether eggs are caged, barn laid or free-range. This


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increased consumers‟ awareness of the different types of egg available, and fuelled rapid growth, despite the higher selling price. The trend towards ethical trading shows no signs of slowing, and the key to future growth lies in the education of consumers and the expansion of Fairtrade certification into new countries and new categories, such as cosmetics and toiletries. The engagement of big companies such as Cadbury‟s and Ben and Jerry‟s will be critical in helping to increase consumers awareness, while retailers will also have an opportunity to play their part by adding messages to their packaging and marketing campaigns explaining why every purchase matters.

TREND 9: THE CHEMICAL BACKLASH

Trend Outline Demand for all things natural As consumers worry increasingly about their health and wellness and the effects of potentially harmful chemicals found in everyday products, demand for natural ingredients in everything from packaged food to toiletries continues to grow. Indeed, a su rvey of 5,000 people across 10 countries carried out by Nielsen on behalf of ingredients supplier Chr Hansen in 2011 found that a massive 92% of respondents are concerned about artificial colours; 88% stated that natural colours add value to food and drinks; and 78% said they are willing to pay a premium for foods with natural colours. Manufacturers are responding to this, both by developing all-natural or allorganic brands and by introducing more natural and organic ingredients into their existing formulas. Eur omonitor International‟s Annual Survey of online consumers of 2011 revealed that more than half of all respondents (52%) were willing to pay more for a product marketed as “natural”, while 48% would pay a premium for “organic” products. Chinese and Indian consumers, in particular, placed a high priority on naturalness, with more than 7 0% of respondents in each market willing to pay a premium for both natural and organic attributes. Chinese consumers concerned about food safety In the case of China, the growing importance of products with a natural and organic positioning is undoubtedly linked to a spate of high-profile incidents linked to the unconventional use of pesticides and other dangerous ingredients as food additives. A study published in the Chinese Journal of Food Hygiene estimated that more than 94 million people in China become ill each year from bacterial food-borne diseases, leading to about 8,500 deaths annually. During the notorious milk scandal of 2008, six babies died and 300,000 were made ill after consuming infant formula contaminated with melamine. China‟s Food Safety Law, which came into effect in June 2009, prohibited the use of unauthorised additives and was intended to provide a basis for monitoring the food process “from farm to fork” . However, due to inefficiency and corruption, the situation has shown little improvement. In 2011, 40 t onnes of bean sprouts were found to have been treated with sodium nitrite and urea, antibiotics and the plant hormone 6-benzyladenine; while pork that glowed blue under kitchen lights was found to be contaminated by a phosphorescent bacteria. A report by China‟s national broadcaster CCTV in April 2012 uncovered the dangers of toxic preserved fruit, showing one company pickling rotten peaches in outdoor pools then spiking them with sodium metabisulphite and adding bleaching agents and other harmful additives to keep them looking fresh. The peaches were packed in unwashed bags that previously held animal feed before being sent to reputable stores.


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India still has a strong culture of traditional farming and natural ingredients, and most consumers expect food to have been produced without the use o f chemical fertilisers, even though only around 114,000 hectares of farmland is officially certified as organic. Reflecting their naturally healthy diet, consisting of a high proportion of fish and vegetables, the Japanese were also among the strongest advocates of natural ingredients, with 46% of respondents in Japan willing to pay extra for products with a natural positioning. Chart 23

Source:

Attributes that Respondents Are Willing to Pay More for, by Country 2011


Organic regulations With regard to organic products, certification ensures that quality standards and production methods are met and assure consumers that they are buying genuine organic products. As organics have grown in popularity and become commonplace in mass -market channels, they now require third-party regulatory certification to gain the confidence of shoppers. There are two sets of international standards defining organic farming: the Codex Alimentarius, which is the joint FAO (Food and Agriculture Organization of the UN)/WHO (World Health Organization) commission for food standards; and the International Federation of Organic Agriculture Movements (IFOAM). In 2011, there were more than 750 IFOAM affiliates in more than 115 countries worldwide. In the US, EU and Japan, organic standards are formulated and regulated at government/regional level. In other countries, certification may be handled by non-profit organisations and private companies. EU members acquired comprehensive organic legislation with the implementation of the EUEco-regulation 1992, with supervision of certification bodies handled at the national level. In March 2002, the European Commission issued an EU-wide label for organic food. This was replaced by a new EU organic logo from July 2010. According to the China Organic Food Certification Centre (COFCC), the number of certificated organic manufacturers in China grew by 30% annually during the review period to reach almost 1,200 in 2010.


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Confusion over labels The definitions of what constitutes “natural” are more hazy. The US‟s Food and Drug Administration (FDA) stated in 1993 that it does not object to the use of the term “natural” on food labels, as long as it is used in a way that is “truthful and not misleading” and that the product does not contain artificial colours, flavours or other synthetic substances. According to the FDA, products derived from plant sources may be described as “natural ingredients”, such as beet powder, lethicin, garlic powder, black pepper, spices or vi tamin C, but animal-based ingredients, hydrolysed vegetable proteins and monosodium glutamate (MSG) must be identified individually on an ingredient list. These guidelines are open to interpretation, however. For example, some argue that high fructose corn syrup is no more or less natural than sugar from sugar beet, with both undergoing a high degree of processing. US companies are constantly being l egally challenged over their use of the term “natural”. Brands such as Tropicana orange juice, Ben & J erry‟s ice cream, SunChips, Tostitos and Snapple were all made to justify their use of the word in 2012; while Kellogg-owned Kashi‟s “all-natural” cereal had to be withdrawn after it was found to contain GM ingredients. In the EU, the new European Parliament (EP) Flavour Regulation 1334/2008, which came into force in January 2011, should increase consumers‟ trust and interest in NH foods in the forecast period, by making them more aware of the artificial ingredients in the food they consume. The new regulation states that in order for flavouring to be classified as natural flavouring from a named source, a minimum of 95% of its ingredients must come from the named source, and the other 5% must originate from natural sources. Fake claims deter consumers Euromonitor International‟s Annual Survey of online consumers confirmed the confusion felt by consumers with regard to products making natural or organic claims. Globally, only 34% and 36% of all respondents, respectively, considered “natural” and “organic” labels to be trustworthy. Interestingly, Brazil and India had the highest proportion of respondents who considered both “natural” and “organic” labels to be trustworthy (45% and 47%, respectively), despite the fact that India has no clear regulatory structure in place for organic labelling. The low level of confidence in natural and organic products is partly due to frequent reports in the media of fake organic products in the marketplace. Many consumers are unwilli ng to pay extra for products that may not be the “real deal”. For example, in late 2011, Interpol discovered an illicit food trade network in Europe that had sold €220 million worth of fake organic products in four years. Interpol seized 2,500 tonnes of produce destined for organic m arkets, representing around 2% of total EU organic production. In 2011, Wal-Mart was ordered to temporarily close seven stores in Chongqing, China, after allegations that it labelled regular pork as organic and sold it at inflated prices. In the beauty and personal care market, many beauty products make “natural” and “organic” claims; however, in the light of the lack of regulation and growing scepticism about such definitions, some companies are focusing more on promoting the absence of certain chemicals, for example by advertising their products as “paraben-free”. Chart 24

Trustworthiness of Descriptors when Used to Label Products, by Country 2011


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Implications Impact on ingredients suppliers The growth in demand for natural products has affected the ingredients industry at all levels, as packaged food and beauty and personal care manufacturers look for more natural ingredients to replace chemicals or highly-processed ingredients in their products. However, at the same time, there is growing competition for the world‟s natural resources, and ingredients companies are no longer the sole customers for agricultural crops. As consumers demand more natural products and foods that are free from artificial colours or flavours, there is a growing trend towards the use of botanical extracts (such as herbs, spices, juices, pulps, etc) as colouring or flavouring foodstuffs, thus removing all mention of colour or flavour ingredients on product labels. In 2012, ingredients manufacturer Chr Hansen upgraded its manufacturing facilities in Denmark and Peru in response to the growing world demand for natural colours. The company has focused in particular on developing natural colours for yoghurts, confectionery and soft drinks. Some of its more recent launches have included a new red hibiscus extract. Botanical extracts in demand According to Euromonitor International‟s ingredients database, packaged food use of botanicals and other bioactives (carotenoids and phytoestrogens) totalled almost 440,000 tonnes in 2011, of which 86% were plant extracts, 13% other botanicals and around 1% beta carotene (mainly as a colouring and effective in very small volumes). Dairy is the largest single application for botanicals and bioactives, representing 84% of 2011 volumes. Botanical and bioactive ingredients overlap many other packaged food ingredients categories, performing a wide range of roles in finished foods. As well as colouring and flavouring roles, they can also act as sweeteners (eg stevia), antioxidants (eg rosemary extract), etc. In addition, the use of botanical ingredients can simply help t o enhance the natural image of foods, an issue that is becoming increasingly important to modern consumers.


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The use of “natural” ingredients, particularly plant-derived ingredients, is also becoming more prevalent in the beauty and personal care industry, despite (or, perhaps, because of) the term “natural” being unclear and poorly defined. For example, the industry has successfully piggybacked on the popularity of vitamins in food and beverages, and is making full use of a wide range of vitamin ingredients. Chemicals gain bad publicity Continued research is drawing attention to the potential harmful effects that some ingredients may have on humans and/or the environment, which is picked up on by consumer lobby groups and the media, resulting in an instant negative impact on ingredients and brands. Reviews are also conducted by regulatory authorities on their position on chemicals in light of new scientific research, and if a chemical receives negative publicity or becomes illegal to use, ingredients companies are faced with having to find alternatives. The largest challenge to companies developing new “safe” and/or “natural” alternatives to chemicals in the beauty and personal care market is to make ingredients as effective and functional as the ingredients they are replacing. For example, natural antimicrobials, such as rosemary extract and green tea extract, are not as effective as traditional preservatives. Summary 3 Impact of Chemical Backlash on Ingredients Industry Food ingredients Personal and beauty care ingredients Wider use of botanicals (natural, plant-derived products)

Wider use of botanicals (natural, plant-derived products)

Greater demand for natural colourings

Natural fats and oils such as palm oil and cocoa butter, are replacing petroleum-based ingredients

Replacement of emulsifiers with enzymes and other texturisers

Natural, plant-derived emollients, humectants and preservatives are replacing petroleumbased ingredients such as the humectants propylene and butylene glycol

Greater demand for natural flavours and flavour enhancers at the expense of synthetic ingredients

Reduction in demand for silicones as a conditioning agent

Switch to natural options within poly/oligosaccharides

Removal of polyethylene glycol and ethoxylated emulsifiers

Artificial sweeteners losing share to stevia and other natural sweeteners

Removal of preservatives altogether, in products with a short shelf life

Falling demand for synthetic preservatives/antioxidants Source:


Impact on packaged food Within the packaged food industry, the trend towards natural ingredients has been especially pronounced in soft drinks and confectionery, where children represent a sizeable target audience and parental concern over artificial additives and their alleged effects is therefore high, and there is still significant potential for development in these areas. In March 2012, Nestlé announced that it was the first major confectionery company to have removed all artificial ingredients from its products in the UK. It began replacing artificial ingredients with natural options in 2005 and has since reformulated 79 confectionery items, including KitKat, Smarties and Quality Street. This required the use of several natural


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ingredients, including concentrates of fruit, vegetables and edible plants such as carrot, hibiscus, radish safflower and lemon to give colour to products. The company has begun similar initiatives in Canada and other Western Europe markets. Natural ingredients could provide a much-needed boost to the soft drinks category over the next few years. New products are increasingly being de veloped with no artificial flavours, colours or sweeteners. Aspartame, acesulfame K and sucralose are being replaced by stevia and sugar cane juice as natural sources of sweetness. Green tea, ginseng, guarana and green coffee beans are examples of plant extracts that consumers are seeking to provide a more natural energy boost in energy drinks. Euromonitor International reported in June 2012 that the use of plant extracts in energy drinks had grown by nearly 80% in the US over the last five years, with an annual growth rate of 7% predicted over the forecast period. With the growing emphasis on pet health, natural pet foods hold exciting opportunities for pet food manufacturers too. A new report by Packaged Facts estimated that retail sales of natural pet products were worth US$4.1 billion in the US 2012, having increased by 17% since 2008. Recent developments include Hill‟s relaunch of Science Diet as a natural product line, Nestlé Purina‟s development of Purina One Beyond and Wal-Mart‟s launch of Pure Balance, its first natural private label pet food. Growing demand for NH food and drink The trend towards natural ingredients has also had a positive impact on the naturally healthy (NH) category within food and drinks. As defined by Euromonitor International, NH products are those that naturally contain substances that improve health and wellbeing, such as high fibre, soy products, sour milk drinks, nuts, honey fruit snacks, granola/muesli bars, olive oil products, 100% fruit/vegetable juice, superfruit juice, bottled water and plant-based RTDs or hot drinks. Sales of NH beverages grew by 42% in value over the 2007-2012 period, to US$188.9 billion, while NH packaged foods achieved value growth of 30% to reach sales of US$98.6 billion. Much of this growth was driven by an increase in the uptake of healthy packaged foods in developing markets such as China, and Brazil and Indonesia. China overtook Japan to become the largest market for NH food and drink in 2012, as sales soared by 153% in value over the review period to reach US$48.4 billion. In 2012, China‟s Bright Food purchased the UK‟s largest NH packaged food company, Weetabix, with the intention of bringing the breakfast cereal brand into Asia, in line with trends towards Western eating habits. Japan ranked close behind with sales of US$47.2 billion, having enjoyed growth of 40% in US dollar terms over the review period. Higher demand in Japan was generated by the recent popularity of “macrobiotic” diets, especially among women, whereby whole grain is used as a staple food type (eg brown rice, brown wheat) in order to maintain well-balanced eating habits. As consumers have become increasingly interested in self-care, youthfulness and illness prevention, demand for products with added health benefits has increased, while foods that do not contain artificial preservatives and colourings attract the attention of parents concerned about the nutritional content of children‟s foods. NH soy products experienced particularly strong growth of 61% over the review period, partly due to the rise in food intolerances and veganism, and partly due to the general perception of their being healthier than dairy products. Table 12

Global Sales of Naturally Healthy (NH) Food and Drink 2007/2012/2017

US$ million

Naturally healthy


2007

2012

2017

% growth 2007/12

% growth 2012/17

132,995

188,887

269,195

42.0

42.5

76


beverages Naturally healthy packaged food – NH high fibre food – NH sweet and savoury snacks – NH oils and fats – NH soy products – NH sour milk products – NH honey – NH snack bars – Others Source:

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75,762

98,560

133,238

30.1

35.2

30,895 15,769

39,567 20,661

50,338 28,560

28.1 31.0

27.2 38.2

10,732 4,859 4,943 4,556 3,460 547

12,058 7,833 6,882 6,138 4,777 646

16,473 10,155 11,970 8,496 6,430 818

12.4 61.2 39.2 34.7 38.1 18.0

36.6 29.6 73.9 38.4 34.6 26.6


Organic benefits from natural image Although not all organic foods contains natural ingredients, the two concepts are often associated as they attract similar types of consumer. Globally, sales of organic packaged food and drink experienced growth of 25% in value over the 2007 -2012 period, and growth is forecast to be slightly stronger over the forecast period, at 31%. Two of the key drivers of the organics market have been the development of organic certification in more countries, and the further expansion of sales among mainstream middleincome shoppers in developed markets. Despite scepticism in some quarters, consumers have become increasingly aware of the perceived health benefits and green credentials of organic food. The US is by far the most developed market for organic packaged foods, but again, emerging markets are behind much of the category‟s growth. Dairy products remains the largest category within organic packaged food and drink, with sales of US$7.8 billion in 2012, due to the importance of organic milk in many markets. However, the most dynamic of the key categories was oils and fats, which experienced value growth of 47%. Baby food also performed well, as parents proved willing to pay a premium to ensure that their infants were getting synthetic chemical-free foods. In China, the organic food movement, though still very small by Western standards, has gained ground rapidly as a result of increasing health consciousness, rising disposable incomes and concerns over the safety of processed food in the wake of recent scandals. However, distribution is limited, and the market remains dominated by a s mall number of categories, including prepared baby food and vegetable and seed oil. Table 13

Global Sales of Organic Packaged Food 2007/2012/2017

US$ million

Organic packaged food – Organic dairy – Organic bakery products – Organic ready meals – Organic baby food – Organic oils and fats – Organic sweet and savoury snacks – Others Source:



2007

2012

2017

% growth 2007/12

% growth 2012/17

20,591 6,433 3,564 2,206 1,398 829 847

25,788 7,757 4,292 2,546 1,903 1,220 1,095

33,803 10,107 5,419 3,187 2,522 1,670 1,472

25.2 20.6 20.4 15.4 36.1 47.1 29.2

31.1 30.3 26.3 25.1 32.6 36.8 34.4

5,313

6,975

9,427

31.3

35.2

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Restaurants sources more natural ingredients The trend towards natural, healthy and authentic ingredients has also crept into the foodservice category, with many restaurants promoting the use of fresh, seasonal, organic or local products. US fast casual operator Chipotle Mexican Grill is an example of a chain that has made a huge success of this positioning. The company emphasises its u se of natural and organic meats and hormone-free dairy, using local farms as its supply base and encouraging consumers to learn more about the benefits of naturally raised meats and the c onsumption of seasonal produce. The brand uses the marketing line “It‟s not just a burrito, its a foil -wrapped, hand-crafted, local farm supporting, food culture changing, cylinder of deliciousness”. Chipotle has grown from a small regional chain into a major player, with sales of US$2.6 billion in 2011 and enjoyed growth of 24% on the previous year – higher than any other major North American operator. In the UK, the 286-strong sandwich chain Pret A Manger promotes itself as a provider of handmade natural food that avoids “obscure chemicals, additives and preservatives” in all of its ingredients. Its milk, oatmeal, coffee, tea, chocolate and popcorn are organic, while its chicken, turkey, beef and ham are “never processed more than they have to be”, being purchased directly from small cooperatives and family-run farmers. The strategy appears to have paid off, as Pret A Manger announced in April 2012 that it planned to open a further 44 stores during the year, of which 20 would be overseas, including its first in Boston in the US. This followed a year of record sales and store openings. Natural beauty With artificial substances such as parabens, petrochemicals and toxins under the spotlight, consumers are increasingly demanding natural ingredients in their beauty and personal care products as well as in their food. Indeed, a recent UK online survey of 1,000 women aged between 26 and 65, carried out by author and radio presenter Janey Lee Grace and author and psychology professor Karen Pine from the University of Hertfordshire, found that natural ingredients are more than twice as likely to matter to women than the brand, and that more than two thirds of women prefer products that are not tested on animals and are free from artificial chemicals. 70% of respondents said they regularly use organic soap or shower gel, two thirds use organic skin care and just over half use mineral make-up; while only 6% of women said they are not committed to using natural products. According to Packaged Facts, natural health and beauty care (HBC) product sales through all US retail channels reached an estimated US$8.5 billion in 2011, representing a CAGR of 10% over the 2005-2011 period. Package Facts reports that much of this growth has come from the proliferation of natural brands in mainstream retailers. Within this market, the skin care category grew by 11% in 2011 alone, to US$5.9 billion. However, hair care was reported to be the fastest growing category within natural HBC over the 2005-2011 period, soaring by 86% to US$2.1 billion. Natural make-up represented the smallest category with a value of US$455 million in 2011. A similar trend is being observed in developing markets, especially in China, where consumers are increasingly concerned about the safety of the products they are using and ingesting. A 2012 study by Mintel showed that 81% of urban Chinese consumers prefer to buy all-natural hair care products and 10% rate the presence of natural ingredients as their most important purchase influence. According to Mintel, almost 64% of new hair care products launched in China in 2011 made a “natural” claim, compared to 50% of all new products globally.


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Increased distribution Whereas natural and organic beauty and personal care products was once a niche category confined largely to health stores, they are now commonplace. Among the largest mainstream natural personal care brands in the US are Burts Bees, Avalon Organics and Intelligent Nutrients, the new brand started up by Horst Rechelbacher, founder of Aveda, in 2008. Horst Rechelbacher reported to Happi that Intelligent Nutrients‟ sales grew by 180% between 2010 and 2011. Some of the major players have recently tried to open up the market by attracting new categories of consumers. For example, Clorox-owned Burt‟s Bees rolled out its new Güdbrand in 2011, targeting Gen Y women. The collection encompasses hair care, skin care and body care products, including fragrances in scents such as Floral Cherrynova (Japanese cherry blossoms and almond milk), Orange Petalooza (blood oranges and hyacinth), Vanilla Flame (vanilla and rice milk) and Pearanormal Activity (pear and açaí berry). The latest trends in the industry, as identified in Organic Monitor‟s third annual North American edition of its Sustainable Cosmetics Summit, held in New York in 2012, include the use of food ingredients, certified organic ingredients and novel ingredients. Examples of the latter include Amazonian oils (eg copaiba, inchi); fruits such as açaí and goji berries, pomegranates and apricot seed oil; African ingredients (eg shea butter, ximenia oil, babussa oil); and Australian bush spices. The industry is also using more plant-based ingredients to replace synthetic ingredients, such as green emulsifiers, paraben-free preservative systems and biodegradable hair polymers. Although mineral make-up has been around for decades, it has only recently become popular due to the trend towards natural cosmetics. Mineral make -up is made from ground-up rocks (mica) and is therefore free from synthetic chemicals and additives. It is also non-comedogenic, so it does not clog pores, letting the s kin breathe naturally. Many of the major beauty brands now offer mineral cosmetics – mostly foundations – within their ranges. Summary 4 Selected Natural Beauty and Personal Care Launches in the US 2011-2012 Güd, a range of natural hair care, skin care and body c are products launched in 2011 by Burts Bees. Sensible Organics in the US launched a 100% USDA-certified organic bath and body collection, Nourish Organic Food for Healthy Skin, for sale in the Whole Foods Market chain. Aveeno‟s Pure Renewal collection is formulated with sulphate-free cleansers and without the use of parabens or synthetic dyes. Natrasurf Technology (naturally -derived from potato starch) helps minimise the amount of cleansers, while still producing the lathering and foaming sensation expected in hair care products. MD SolarScience launched the Natural Mineral Sunscreen KidStick SPF 41, which is a hypoallergenic, water resistant formulation containing naturally derived mineral sunscreens (zinc and titanium dioxide) and is free from PABA, parabens, vitamin A, chemical blockers and fragrance. Korres launched its new Pomegranate Clarifying/Pore Minimizing/Mattifying Toner, featuring 99% natural content and made with 15% pomegranate water and natural astringents. Intelligent Nutrients launched Lip Delivery Antioxidant Gloss, a USDA certified organic, glutenfree lip gloss. Source:



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Big brands fight back The major consumer goods companies, in addition to more specialised players, are bowing to public pressure to reduce the amount of chemicals in their products or introduce more natural lines. In July 2012, Unilever repositioned its bath and shower brand Radox in the UK to promote its natural ingredients. In August 2012, Johnson & Johnson, owner of beauty and personal care brands such as Aveeno, Lubriderm and Neutrogena, announced that it would stop or reduce the use of all potentially harmful chemicals, including 1,4 -dioxane, formaldehyde, parabens, triclosan and certain phthalates, in its adult beauty and personal care products by the end of 2015. In November 2012, the US drugstore chain Walgreens announced its roll-out of Ology, a line of personal and cleaning products formulated with gentler chemicals. The launch was reportedly partly in response to the proposed new “Safe Chemicals Act”, and partly due to increased consumer demand for such products.

Outlook Plenty of potential, but transparency needed Demand for natural, authentic and wholesome ingredients will continue to grow in the future, providing opportunities for marketers in a range of industries, including packaged food, pet food, foodservice, beauty and personal care and household cleaning products, to develop products claiming to be natural, healthy and free from harmful chemicals. The trend towards natural ingredients will be apparent worldwide, but China holds particularly strong growth prospects, as recent food contamination scandals have made consumers more wary and demanding than ever. However, clearer regulations are needed with regard to the use of the term “natural”, as consumers demand more transparency in labelling and will be unwilling to pay the higher price commanded by such products if they are dubious about their origins. It has proved very difficult to define what is natural from a scientific point of view, but formal definitions or even voluntary guidance would help clear up consumer confusion and scepticism, and avoi d the need for lawsuits. Progress is already being made with regard to voluntary regulations. The Natural Products Association (NPA), which has developed its Natural Seal certification for personal care and home care products and ingredients in the US, announced in 2 012 that it would release new standards regarding the use of the word “natural” on meat and poultry products and snacks and cereals. Personal and home care products certified by NPA must be at least 95% natural ingredients or ingredients from natural sources, excluding water. In the meantime, consumers will make more informed choices, helped by new apps such as Eco-Label, developed in the US by Consumer Reports, whose label “report card” provides guidance on which food labels make true and meaningful claims, and which state natural and organic properties are not meaningful or false. Opportunities in the ingredients industry Stronger demand for natural products provides new opportunities for the ingredients industry, although it will impact manufacturers of artificial ingredients. Botanicals are forecast to show particularly strong growth over 2011-2016, benefiting from ongoing interest in all types of natural ingredients and their versatility in terms of function. However, much tighter health claims regulation recently introduced in Europe could restrict opportunities for the use of botanicals as functional ingredients. For example, claims related to green tea flavonoids and carotenoids (such as lutein and lycopene) have not been sufficiently substantiated to achieve EU authorisation.


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Monk fruit extract has the potential to rival stevia One natural ingredient that has potential for significant growth in the future is monk fruit extract (luohanguo), currently a much more expensive alternative to stevia. Monk fruit extract is a high intensity, zero-calorie sweetener that does not have stevia‟s bitter aftertaste. It can be used in blends with sucrose, fructose and erythitol. Although it has yet to be approved for use in Europe, progress has been made in the US, with BioVittoria (for which the distribution rights were bought by Tate & Lyle in 2011) and Amax NutraSource receiving Generally Recognized As Safe (GRAS) status for their monk fruit extracts. BioVittoria estimates that its product is being used in 30-40 products across the US. Kellogg-owned Kashi also uses monk fruit extract in its Honey SunShine breakfast cereal. Over the next few years, monk fruit extract may become more than just a sweetener, as researchers look to harness antioxidants and polyphenols from the fruit as well as the sweet mogroside compounds. Combining nature with science Within the beauty and personal care category, there is thought to be further potential for combining natural and organic ingredients with actives as the basis for scientific and marketing claims for anti-ageing products. This is an area that holds much growth potential, given the growing demand both for anti-ageing products and for natural ingredients, and ongoing research into plant uses. Table 14

Forecast Sales of Natural Ingredients 2011/2016

Tonnes Plant extracts Cultures Natural product colours Essential oils Stevia Source:

2011

2016

% growth

1,859,845 1,095,328 660,109 175,826 338

2,400,652 1,332,859 722,357 226,465 1,323

29.1 21.7 9.4 28.8 291.2


TREND 10: MOBILE COCOONING

Trend Outline Increasing reliance on digital devices Consumers worldwide are becoming addicted to their mobile devices, including smartphones, netbooks and tablet computers. A July 2011 survey by location-based technology company Telenav found that 50% of respondents claimed they would give up such pleasures as coffee or sports and 10% would prefer to go without shoes rather than do without their smartphones. A UK study by technology retailer Pixmania, published in October 2012, suggested that smart devices were turning people into workaholics by preventing them from ever switching off from work. Its survey found that more than 90% of office workers have an email-enabled phone, with a third accessing them more than 20 times a day. It estimated that overall, smartphones and tablets add an extra 460 hours to the working year. Another study from TripAdvisor recently claimed over half of consumers check their work emails every day while on holiday.


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Cocooning has been a key marketing buzzword since the start of the decade, as consumers faced with the rising costs and safety fears of going out, and tempted by the array of sophisticated home entertainment gadgets and restaurant quality home meal options on offer, have begun to live a more home-centred lifestyle. However, the emphasis has now turned towards individual cocooning, anywhere and anytime, as internet-enabled mobile devices have become increasingly widespread and capable of fulfilling a multit ude of tasks, from shopping, entertaining and networking to banking, education and navigating. Although there is more interaction than ever between friends, family and strangers, it is more likely to take place remotely from a digital device than face to face. Innovations such as 4G (fourth generation ultra-broadband internet access), mobile devices that function more like powerful desktops, mobile payments and increased security are changing the way consumers live their lives. As usage of smart devices reaches critical mass over the forecast period, mobile apps will continue to be the defining trend in convenience. Smartphones used most for emailing and internet browsing Consumers‟ increasing reliance on smartphones was evident from Euromonitor International‟s Annual Survey of online consumers, which showed that over half of all respondents globally send and receive emails (53%) and browse the internet via their phones (51%) at least once a week. In Japan, a massive 81% of respondents said they regularly send and receive emails via their phones, while 77% of Chinese respondents browse the internet from their phones at least once a week. Over a third of global respondents regularly visit social networking sites (35%), watch TV or video (33%) and play games (35%) on their phones. All three activities were most common India and China, although the survey in these markets was largely limited to affluent, urban consumers in these markets. Mobile shopping was found to be less common, with only 15% of respondents doing this at least once a week. However, the frequency of this activity varied significantly across countries, with as many as 33% of Chinese online consumers regularly shopping from their phones, compared with just 6-7% in France, Germany and Japan. Chart 25

Mobile Phone Use by Country 2011


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Implications Rapid growth in smartphone sales The most obvious outcome (and also cause) of the boom in demand for content on the move has been the phenomenal growth in sales of smartphones and tablets, and these categories are far from saturation. While only 29 million smartphones were sold worldwide in 2006, this number had leapt to 468 million by 2011 and is expected to reach 1.5 billion by 2016. A good deal of the growth in smartphone sales is due to their replacing original original feature phones. While in 2006, smartphones represented only a small percentage of the total mobile phone market, at less than 4% globally, by 2011 this share had risen to 32%. The share of smartphones is forecast to jump to 78% by 2016. In 2011, the share of smartphones was highest in South Korea and Demark, at 81% and 73%, respectively. While in emerging markets such as Turkey, Brazil and India, smartphones still represent less than a quarter of volume sales, they are gaining share rapidly. Many consumers in China and India cannot yet get online at home, and the growing smartphone market is tapping into this demand. In India, smartphones accounted for only 8% of total volume sales in 2011 but the potential in this market is massive, given that India was the world‟s second largest market for mobile phones in 2011, with a total of 202 million units sold. Furthermore, India‟s wireless and mobile infrastructure has also experienced rapid growth, due to the relatively low cost of providing mobile services in comparison to fixed-line services. China was the world‟s largest market for smartphones by volume in 2011. Chinese internet providers such as Alibaba and Baidu have launched c heap handsets using their own mobile platforms, with big-name players Lenovo, ZTE and Huawei also offering cheaper phones. The emergence of tablets Since Apple launched its first iPad in 2010, the tablet has gone from an early adopter‟s “mu sthave” to a common device used by consumers from all walks of life. Its success lies in the fact that it successfully bridges the gap between the laptop and a smartphone, having almost as


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much power and the larger screen of the former, with the convenien t touch screen format of the latter. An increasing number of consumers are willing to pay for this ideal platform for delivering and consuming content both at home and on the go. The number of tablets sold globally soared from just 4 million units in 2006 to 51 million in 2011, and is forecast to increase to 181 mill ion by 2016. Globally, tablet ownership is currently estimated at around 12%, further indicating tremendous growth opportunities for the devices in the years ahead, especially in markets such as China and India, where mobile devices are already the preferred vehicles for accessing the internet. Until recently, the tablet category was dominated by Apple, but competitors like AsusTek Computer and Samsung are now contesting Apple‟s leadership strongly strong ly with Android-based products. Indeed, there are now numerous tablet brands available in the global marketplace, and their number continues to grow as products evolve to suit all budgets and needs. 2011 saw the launch of Amazon‟s attractively priced Kindle Kindl e Fire, which managed to gain a 14% volume share in the US in its first year. Table 15

Smartphones as a % All Mobile Phones 2006/2011/2016

% volume sales South Korea Denmark Switzerland Canada Netherlands Belgium Sweden Norway Australia UK Italy Malaysia Germany US France Spain Venezuela Austria China Taiwan Japan Poland Mexico Greece Thailand Indonesia Russia South Africa Argentina Turkey Brazil India WORLD Source:



2006

2011

2016

– – 3.2 7.8 1.0 2.3 9.0 – 9.8 0.4 4.1 5.0 1.7 9.1 1.8 – 13.3 0.9 2.4 – 1.2 6.6 – – – 4.3 3.8 5.4 1.5 0.2 – 1.0 3.6

80.7 73.0 69.7 68.6 68.0 66.5 65.8 64.9 64.2 58.8 57.9 54.4 52.8 49.5 49.1 49.0 44.8 40.7 40.1 40.1 36.9 33.1 32.1 31.0 26.9 25.7 25.0 25.0 24.8 23.0 16.7 8.4 32.4

99.3 95.4 91.8 94.4 97.8 94.0 98.7 95.9 93.5 73.1 97.0 91.5 84.8 87.7 89.7 89.4 63.3 95.0 98.1 80.7 68.4 83.7 80.0 89.9 65.9 50.5 60.5 89.9 48.5 82.9 77.8 68.5 78.1

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Chart 26

Source: Notes:

Global Sales of Smart Devices 2006/2011/2016

Euromonitor International Tablets and similar: portable computers designed primarily for touchscreen interface Excludes laptops and netbooks

Smart shopping Another key consequence of the growing use of smart devices is the rise of mobile commerce (m-commerce). Consumers are not only buying merchandise, services and content direct from their smartphones or tablets, they are also using apps to get the most out of their shopping experience. This includes receiving offers of local deals, downloadable coupons or scanning QR codes in-store or from print media to gain more information about products before buying. M-commerce allows the consumer to purchase goods by way of an app that acts as a gobetween from the smartphone to the store, thus cutting out the website c ompletely. Difficulties in developing safe and reliable payment facilities have, however, so far held back the market for m-commerce, especially in emerging markets. In some markets, companies are c ircumventing the lack of online payment options by offering cash-on-delivery (COD) options and full refund guarantee to entice online purchases. However, online purchases in emerging markets are largely restricted to consumers in cities and urban residences, as the poor infrastructure in rural areas make delivery difficult and uneconomical. The SoLoMo revolution The m-commerce market has recently been revolutionised by the arrival of “SoLoMo”, an amalgam of social, local and mobile that refers to the convergence of social media with mobile phones and location-based services. This has been made possible due to the tracking capabilities of smartphones, which enable customers to be targeted based on where they are and what decision they are making. Services such as Foursquare and Gowalla use social marketing and mobile check-ins as a way to drive business to locally-based merchants and provide concierge-type recommendations. For example, Four Seasons was one of the first luxury hotel brands to go the geo-social route with Gowalla for engagement and promotional purposes. Its Gowalla app offers guests concierge recommendations while travelling, and allows them to earn hotel credits.


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These location-based concepts are becoming ever more innovative. For example, US-based app developer ThinkNear aims to boost shopping during slow trading hours and bad weather, producing discount coupons sent to nearby consumers‟ mobile devices during these times. Big names such as Apple and Amazon appear to be embracing SoLoMo by launching their own mapping apps that include a social mapping focus. Apple is adding social functionality by integrating Yelp, an online city guide to leisure venues, into its mapping app so that users can use Siri (Apple‟s voice activated virtual assistant) to access Yelp‟s social location-based functions, including check-ins, and communicate with others without exiting the map. It is thereby making maps social by combining them with people, merchants, and events. Apps development The explosion in smart device usage has created a world of opportunities for software developers. BusinessNewsDaily reported in July 2012 that the mobile applications market is worth US$20 billion and growing. This has led to a whole new class of software entrepreneurs, many of whom are small businesses. Research conducted by ACT and Microsoft‟s TechNet shows that the app economy has created between 400,000 and 600,000 jobs. At the same time, however, the app culture has negatively impacted a range of categories, including video game hardware and software, books and newspapers, CDs and MP3 players, financial services, travel, education and even health and fitness services (Apple‟s App Store currently offers over 9,000 mobile health apps, including around 1,500 cardio fitness apps, 1,300 diet apps, 1,000 stress and relaxation apps and 650 women‟s health apps). The travel and tourism industry has been transformed by app development, with consumers gaining unprecedented control over the holiday experience. These days, a high percentage of travel bookings are made via smart devices, while destinations are researched thoroughly via apps such as TripAdvisor, which pairs a user‟s GPS coordinates with c ontent from the TripAdvisor website; and TripIt.com, which stores all the user‟s travel confirmation emails and other trip information online, to be accessed on the go. Another app, OpenTable, provides realtime inventory of restaurant table availability for major cities around the world. These apps, as well as apps acting as tour guides around famous landmarks and museums, have to a great extent replaced the need for guide books and travel agents. The challenge of monetising content One of the main challenges facing mobile content developers has been how to monetise content that has for the most part been previously available to consumers for free. However, studies show that consumers are willing to pay for content such as downloaded music and books to use on their devices. According to IT researcher Gartner, worldwide mobile app store downloads totalled 24.9 billion in 2011, of which free downloads accounted for 22.0 billion, or 88%, and paid-for downloads 2.9 billion. Furthermore, most of the apps that consumers are buying (an estimated 90%) cost less than US$3. Apple still dominates the apps market, with its App Store accounting for an estimated 25% of available apps in all stores in 2012. Other major players include Google with Google Play and Microsoft with its Windows Phone Marketplace. App stores from third parties are also increasingly popular, such as Amazon, and Facebook‟s recently launched App Center. In Chi na, there is reportedly a booming market for independent Android stores due to the lack of presence of Google Play.


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A new market of mobile gamers Gaming is one of the fastest growing categories in mobile, with huge g rowth seen in Apple‟s iOS and Google‟s Android platforms. Mobile has brought gaming to a large audience, with many new gamers having never played on traditional gaming devices or computers. A recent report by Newzoo revealed that the number of US consumers playing games on their smartphone, tablet or iPod Touch surpassed the 100 million mark in March 2012, representing growth of 35% since the previous year. Europe counted a further 70 million gamers across seven countries, having seen lower growth of 15%. Whereas males have traditionally dominated video games usage, women were found to be almost as avid mobile gamers as men. In the US, men accounted for 52% of mobile gamers, and in the key European markets 55%. Newzoo also reported that in 2011, mobile gaming accounted for 13% of all time spent on games worldwide, totalling more than 130 million hours a day, and 9% of total money spent on games, at US$5.8 billion. According to its research, 4.2 million iOS games are downloaded per day in the US, and 2.4 million in the key EU markets. Some gaming companies are fighting back with their own mobile offerings. For example, in 2012, Sony launched its new PlayStation Mobile platform for Vita and Android-based devices in nine countries, with more to follow. The service launched with 2 1 games. Once purchased, the content can be played on up to three different devices. Commercial opportunities For marketers, the burgeoning apps market has opened up a world of opportunities for digital and mobile advertising, particularly if the service they appear on is free of charge. According to an October 2010 report from mashable.com, a news source for social and digital media, in-app iAds are fetching as much as five times the price of online advertising, with higher click-through rates reported. Furthermore, despite concerns about an ever stronger “surveillance society”, mobile phone apps are gathering huge amounts of data from consumers. This has the advantage of allowing companies to tailor marketing much more closely to consumer needs. The tracking capabilities of devices allow users to “check-in” at various venues, and this has powered the creation of several major new social networks, including Foursquare, Gowalla, Facebook Places and Google Latitude. Popular location-based mobile apps like Flirtomatic, Skout and Grindr for the gay community have revolutionised socialising and dating for many. Experts believe that people will soon no longer need to fill in questionnaires on dating sites. Their personal information will be held on servers in “data clouds” that will alert them automatically when a potential love interest is nearby.

Outlook Potential in emerging markets Mobile cocooning will remain one of the key trends of the next five years and beyond, as the use of a mobile device to carry out all manner of tasks becomes second nature to consumers – especially the young “digital natives” who have grown up with smart devices. Furthermore, browsing smart devices will become e ven quicker and easier with the roll out of fourth generation (4G) services around the world. The extra speed and capacity offered by 4G will allow for much higher quality of audio and video streaming while on the move, and will open the way for a new generation of 4G ready smart phones. By 2012, more than 40 countries had introduced 4G, including the US, Canada, Russia, Japan, Australia, Germany, India and Brazil. The first 4G service went live in the UK at the end of October 2012, via the EE network. With tablets being built to be reliant on cloud services and designed around a touchscreen interface, there will be less need for storage and output peripherals. Sales of monitors, printers


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and other computer peripherals will be adversely impacted by the growth of smart devices in the future. Smartphones to become accessible to all Over the forecast period, smartphones and tablets will make si gnificant inroads into the lower end of the mass market, especially in emerging markets, where many are discovering such devices for the first time. For example, Huawei‟s Android smartphone, on the market for less than US$100, has had success in Kenya, and several other manufacturers are launching similarly low-priced products across Africa, Southeast Asia, Latin America and India. Likewise, manufacturers such as Micromax Informatics and Olive Telecom have been introducing their own low-priced tablet PCs. China, which has already become the world‟s largest market by volume for smart phones and tablets, is forecast to experience massive growth of 246% in combined sales of the two devices over the forecast period, to reach 354 billion units by 2016, while the number of units sold in India is predicted to rocket from just 17 bill ion units in 2011 to 262 billion by 2016. The introduction of the world‟s cheapest tablet computer in 2011, the Aakash, which is partly subsided by the Indian government, will boost tablet and internet usage among India‟s lower income and student consumer segment. Hybrid smart devices will create new demand The future will see the emergence of new s egments that bridge the gap between smartphone and tablet, such as “phablets” (large smart phones with 5-inch/12.7cm displays) and mini-tablets (small tablets with 7-inch/17.8cm displays). The first phablet was the Dell Streak, released in June 2010. More recent and successful examples include the Samsung Galaxy Note, the Note II, the HTC J Butterfly and the LG Intuition. After Samsung‟s Note 1 sold around 10 million units globally, the company announced the launch of its Samsung Note 2 in October 2012. The product was immediately succe ssful, with its sleek design and features such as the quad-core 1.6GHz processor, NFC and 32GB of memory. Other phone manufacturers are likely to follow suit, and there were rumours in late 2012 that Sony‟s C650 Odin smartphone, due for launch in January 2013, would also have a 5inch (12.8cm) display. New mini-tablets include Google‟s Nexus 7 Android tablet and Amazon‟s Kindle Fire HD, each with 7-inch (17.8cm) displays. Their launch was followed by Apple‟s release of the iPad mini in 2012, which measures 7.9 inches (20cm), compared to the original 9.7-inch (24.6cm) version of iPad. The iPad mini is thin and light and shows the design influence both of the iPhone 5 and of the new iPod touch. The device was so popular that it sold out in record time in several markets. Indeed, in the US, the white version reportedly sold out within 20 minutes of its pre-order release. Table 16

World‟s Leading Markets for Smart Devices by Country 2011/2016

Million units China India US Brazil Japan Russia South Korea Indonesia


2011

2016

% growth

102,415 17,097 101,462 9,560 16,419 11,730 21,508 9,230

353,734 261,676 162,490 73,455 35,983 32,838 30,397 29,292

245.4 1,430.6 60.1 668.4 119.2 179.9 41.3 217.4

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UK France Italy Spain Germany Mexico Canada Turkey Netherlands Thailand Australia South Africa Source: Note:

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16,276 14,193 14,950 10,100 14,769 8,551 11,433 3,073 3,875 3,134 7,699 3,263

27,544 25,765 25,193 24,662 24,254 23,314 17,022 13,258 12,936 11,161 10,875 10,842

Euromonitor International Comprises smartphones, tablets and similar (portable computers designed primarily for touchscreen interface, excluding laptops and netbooks

SoLoMo will continue to evolve In terms of content, huge potential exists for the development of m-commerce, gaming and other apps for smart devices. With more consumers turning to mobile devices for on-the-go product research, communications and purchasing, SoLoMo will remain vital for brands to engage with their customers and stay relevant i n an ever-changing digital market space. However, with the market for check-in and ambient location apps becoming increasingly crowded, it remains to be seen which services will survive and be successful. For example, apps such as Highlight and Glancee, which were initially purchased by Facebook, were later shut down as they did not catch on with consumers. Retailers need to encourage consumers to check-in at the places they go by offering treats such as exclusive previews or behind-thescenes content. In-app purchase models will help monetise content The number of free and paid-for downloads is expected to soar over the next five years. Gartner forecasts that total downloads will reach almost 310 billion by 2016. Although as many as 93% of these will be free of charge, the 21.7 billion or so paid-for downloads will provide opportunities for marketers to gain direct revenue. In-app purchase business models, whereby the original app is downloaded f or free but customers can then pay for additional items, may be the most effective way to convert casual app users into paying customers and retain them. The challenge for marketers in this case is to create a positive user experience and introduce continued product updates. Gartner estimates that in-app purchases will drive 41% of store revenue in 2016, as the number of downloads featuring in-app purchase will increase from 5% of total downloads in 2011 to 30% in 2016. Chart 27

Global Mobile App Store Downloads 2011-2016


69.2 81.5 68.5 144.2 64.2 172.7 48.9 331.4 233.8 256.2 41.3 232.2

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Euromonitor 10 Global Consumer Trends

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